The “Magnificent Seven” stocks are core positions in many portfolios. You don’t become megacap monsters without the huge earnings power and investor interest that Magnificent Seven stocks bring.
In the latest Hazeltree Crowding Report, which tracks which stocks institutional investors are holding, six of the seven Mag 7s — excluding Tesla — were among the top 10 most popular long positions in May.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
But of those six, three appear to be the most attractive right now — Nvidia (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT), and Meta (NASDAQ: META).
1. Nvidia
All three of these stocks have one thing in common — they are trading at a significant discount.
Nvidia stock is trading at just 23 times forward earnings, down from 40 this time a year ago. Its long-term valuation is even more attractive as it has a five-year price/earnings-to-growth (PEG) ratio of just 0.63. A PEG ratio below 1 means that the stock is undervalued relative to its long-term earnings expectations — and the lower the PEG ratio, the cheaper it is.
This alone signals that Nvidia is in the buy zone, given its huge earnings power. In the latest quarter, revenue jumped 20% sequentially and 85% year over year while earnings surged 214% year over year. For the current quarter, Nvidia anticipates revenue of $91 billion, an 11% increase over last quarter, and a gross margin of 74.9%, down slightly from 75% last quarter.
Looking out, this fiscal year analysts anticipate 88% earnings growth for Nvidia to $8.96 per share. For the next fiscal year, its fiscal 2028, Wall Street expects 42% earnings growth for Nvidia.
Analysts have a median price target of $300 per share for Nvidia, which suggests a 44% return over the next 12 months.
2. Microsoft
Microsoft stock has not had a great year, down 21% year to date. Microsoft’s share price decline is due to various factors, including its formerly high valuation, concerns about overspending on artificial intelligence (AI), worries related to its partner OpenAI’s profitability, slightly slowing AI cloud growth, and other issues.
But most of these are short-term concerns. In the latest quarter, Microsoft’s results alleviated some of those issues as it had blowout earnings that topped estimates. More importantly, its cloud revenue surged 29% year over year while its Azure AI cloud sales rose 40%. Also, it restructured its deal with OpenAI so it is no longer an exclusive provider and no longer pays revenue share to OpenAI.
