The group known as the “Magnificent Seven” consists of some of the largest companies globally, including:
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Nvidia (NASDAQ: NVDA)
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Alphabet
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Apple
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Microsoft (NASDAQ: MSFT)
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Amazon
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Meta Platforms (NASDAQ: META)
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Tesla
While these seven stocks have historically been strong investments, they aren’t usually considered cheap. However, indications suggest we might be approaching a time when several of these stocks can be bought at appealing valuations compared to a few months ago.
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Which of these stocks are now potentially undervalued? Let’s examine further.
To determine this, we need to select an appropriate evaluation method. Given the rapid growth of several of these companies, using forward earnings appears most effective. While trailing earnings can offer some insights, the surge in earnings driven by the AI boom suggests that past data doesn’t accurately reflect the current business landscape.
Most of these stocks now have valuations clustering within a fairly normal range, with the exception of Tesla, which trades at nearly 200 times forward earnings and has therefore been excluded from this analysis.
Currently, the stocks are valued from about 30 to 22 times forward earnings. I’m particularly interested in those in the 22 to 24 times range, as Nvidia, Microsoft, and Meta Platforms are appearing as attractive options.
This attractiveness is further highlighted when considering that the S&P 500 (SNPINDEX: ^GSPC) averages about 21.8 times forward earnings, indicating that these stocks are valued in line with the market despite their performance being superior.
