This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Key Points
- Each of the "Magnificent Seven" stocks has grown huge -- recently worth more than $1 trillion.
- Several of the seven are reasonably to attractively valued right now despite rapid this growth.
- Facebook, Microsoft, and Meta Platforms all offer a compelling growth proposition today.
You know the "Magnificent Seven" stocks, right? They're Google parent Alphabet, Amazon, Apple, Facebook parent Meta Platforms (NASDAQ: META), Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA), and Tesla.
The companies are magnificent, in part, because of their rapid growth rates, and many investors who don't own them are likely wishing they did. Fortunately, if you're one of those folks, it's not too late to invest in some Magnificent Seven stocks.
Here's a look at three that are reasonably valued at recent levels.
Magnificent growth
One of the most magnificent things about these companies is how rapidly they've grown -- to enormous sizes. Check it out:
| Stock | Market Capitalization (in trillions) | 10-Year Average Annual Growth Rate |
|---|---|---|
| Alphabet | $3.1 | 21.9% |
| Amazon | $2.3 | 22.4% |
| Apple | $3.7 | 24.9% |
| Meta Platforms | $1.8 | 22.1% |
| Microsoft | $3.8 | 27.4% |
| Nvidia | $4.5 | 74.5% |
| Tesla | $1.5 | 39.7% |
Data source: Morningstar.com, as of Oct. 16.
That's right, each of them was recently valued in the market at more than $1 trillion -- and, often, a lot more. Each of them has been growing at an average annual rate of more than 20% over the past decade, too.
Despite all this growth, the following members of the cohort seem reasonably valued.
1. Nvidia
Nvidia (NASDAQ: NVDA), a leading semiconductor company, might be the one stock out of the seven that you'd most like to own, given its recent torrid growth rate. (Remember though that past performance isn't a guarantee of future performance!) You might be happy to learn that it's one of the more reasonably priced stocks in the bunch, with a recent forward-looking price-to-earnings (P/E) ratio of 29, well below the five-year average of 39.
The company was once known for its gaming chips, but now it's not only a leader in graphics processing units (GPUs) for games, but also in chips for data centers. And data centers are booming, as much of our artificial intelligence (AI) activity runs through them. This all suggests that Nvidia has a lot more room to grow.
Don't buy into the stock before reading up on it, though, because it does have some competition, from the likes of Advanced Micro Devices and Broadcom.
2. Meta Platforms
Meta Platforms (NASDAQ: META) is the parent company of Facebook, and one of Facebook's most amazing features is its scope. Consider this: In a world that was recently home to 8.1 billion people, each of Meta Platforms' main platforms -- Facebook, Instagram, and WhatsApp -- recently boasted more than 3 billion active monthly users. Students of business might salivate at such numbers, because if Meta can monetize just a small fraction of them a little more than it already does -- such as by better targeting ads to consumers -- that will be some serious money.
Like most of the Magnificent Seven, Meta Platforms has been investing heavily in AI -- to the tune of tens of billions of dollars -- building data centers and custom AI hardware. For example, it's aiming to build its own AI accelerator chips, which would compete with those of Nvidia. Meanwhile, its digital advertising business is still generating gobs of cash. (Remember how powerful it can be to generate money from a massive user base.)
Meta's stock seems reasonably valued to somewhat overvalued, with a recent forward P/E ratio of 24 only a bit above the five-year average of 21. Your assessment of that valuation should take into account how confident you are in the company's ability to keep growing briskly.
3. Microsoft
Then there's Microsoft (NASDAQ: MSFT), home to the dominant Office 365 suite of applications, the Azure cloud computing platform, the Xbox gaming platform, the Windows operating system, and even LinkedIn, among many other things. Its Copilot virtual AI assistant is accessible in multiple Microsoft products, and the company hopes that millions of its Office 365 subscribers will pay up for the paid Copilot add-on.
The company is growing well, with fourth-quarter revenue up 18% year over year and net income up 22% -- and CEO Satya Nadella noting, "Cloud and AI is the driving force of business transformation across every industry and sector. ... We're innovating across the tech stack to help customers adapt and grow in this new era, and this year, Azure surpassed $75 billion in revenue, up 34 percent, driven by growth across all workloads."
Microsoft is a dividend-paying stock, too, with a recent dividend yield of 0.71%. That may not seem like much, but it's been growing briskly. The total annual dividend payout was recently $3.32 per share, up from $2.54 in 2022 and $1.89 in 2019. The company's stock is reasonably valued, as well, with a recent forward P/E of 33 a bit above the five-year average of 30.
Take a closer look at any of these companies that interest you. You may want to buy shares hand over fist -- or buy shares more gradually.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
