2 Magnificent Seven stocks with a “strong buy” rating for July 2024

The “Magnificent Seven,” a group of leading mega-cap technology giants, have become key drivers of major stock market indices such as the S&P 500 and the Nasdaq 100.

Identified in 2023 based on their outstanding market performance, this cohort consists of Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), Nvidia (NASDAQ: NVDA), Alphabet (NASDAQ: GOOGL), Amazon (NASDAQ: AMZN), Meta (NASDAQ: META) and Tesla (NASDAQ: TSLA).

These companies are not only known for their solid business operations and historical stock performance, but are also strategically positioned to take advantage of advances in artificial intelligence (AI) and other cutting-edge technologies.

Their combined influence is considerable: they represent a significant portion of the S&P 500 and the Nasdaq 100 and thus play a crucial role in the development of these indices.

The cumulative market capitalization of these stocks was $16 trillion as of June 26, 2024. Despite some concerns about overvaluation, certain stocks in this group still represent solid investment opportunities.

This prompted Finbold to examine the fundamentals and analyst ratings of the Magnificent Seven stocks to determine which stocks offer potential buying opportunities.

Amazon (AMZN)

Due to its solid financial position, strategic investments and market leadership, Amazon remains an attractive stock for investors and retailers.

In the first quarter of 2024, Amazon reported a remarkable 216% year-over-year increase in earnings per share (EPS) to $0.98, with revenue increasing 13% to $143.3 billion. Amazon Web Services (AWS), a key profit driver, saw revenue increase 17% to $25 billion.

Amazon’s strategic investments in AI and cloud services further strengthen its growth prospects. The company’s $4 billion investment in AI startup Anthropic and AWS’s development of generative AI services position the company at the forefront of technological innovation.

In addition, Amazon recently joined the exclusive club of U.S. companies with a market value of over $2 trillion, underscoring its market dominance and investor confidence. The company’s share price has risen by over 26% since its inclusion in the Dow Jones Industrial Average in February 2023.

Amazon’s retail growth, especially in North America and the international segment, has significantly increased overall profits. In the first quarter of 2024, revenue increased 13% year-on-year. The launch of ads on Prime Video has also boosted revenue growth. The advertising services segment reported a 25% increase.

Amazon Web Services remains the world’s largest cloud services provider with a 31% market share. The company’s continued investments in AI and customized chips for data centers strengthen its competitive advantage.

Based on the forecasts of 42 Wall Street analysts, Amazon stock is expected to continue rising. The average price target for the next 12 months is $221.68, which represents an increase of 13.94% from the last price of $194.56. The highest forecast is $246.00, while the lowest is $200.00. The consensus rating is Strong Buy.

Despite its impressive growth, Amazon’s valuation metrics suggest it remains a bargain. With a price-to-sales ratio of about 3, a P/E ratio of 49.06, and a PEG ratio of 1.50, Amazon is well positioned for continued growth. Amazon’s resilience, strategic investments, and market leadership make it an attractive buy for investors and retailers.

Microsoft (MSFT)

Due to its strategic integration of AI across its product range, robust financial position, strong market position and attractive valuation, Microsoft remains a top choice for investors and traders.

The company’s partnership with OpenAI has significantly enhanced the company’s cloud and software offerings, particularly by embedding AI into the Office 365 suite and introducing AI-powered tools such as Microsoft 365 Copilot.

Microsoft’s Azure cloud platform, which holds a 25% market share, is instrumental in the company’s expansion into AI and cloud services. With the recent acquisition of Activision Blizzard, Microsoft has diversified its revenue streams and expanded its portfolio to include popular gaming franchises.

Despite facing stiff competition from tech giants like Apple and Nvidia for the title of the world’s most valuable company, Microsoft recently reclaimed the top spot. This resurgence is due to the company’s strong fundamentals and growth prospects.

With a gross margin of 70% and forecast earnings per share of $11.77, investors are likely to view any additional benefits of AI integration positively.

From a valuation perspective, Microsoft is compelling. The company trades at a P/E ratio of 29.16 and a PEG ratio of 2.71, suggesting the stock is fairly valued relative to its growth potential.

In addition, Microsoft’s price-to-sales ratio of 12.41 and enterprise value-to-EBITDA (EV/EBITDA) ratio of 24.54 reflect its strong earnings potential and efficient use of capital.

Analysts are optimistic about Microsoft’s future prospects. Based on 35 Wall Street analysts, the average 12-month price target for Microsoft is $500.71, representing an increase of 12.03% from the recent price of $446.95. The highest forecast is $600.00 and the lowest is $450.00, with the consensus rating being Strong Buy.

Due to their strong financial performance, strategic AI investments, and robust market positions, both Amazon and Microsoft are attractive buys for July 2024.

However, due to the inherent volatility and risks of the stock market, investors should remain cautious and conduct thorough research.

Disclaimer: The content of this website does not constitute investment advice. Investments are speculative. When you invest, your capital is at risk.