3 ‘Magnificent Seven’ Stocks Up 50% to 122% in 2024 (and Beyond), According to Select Wall Street Analysts

By | December 22, 2023

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In just over a week, the curtain will close on what has truly been a banner year for Wall Street. The iconic Dow Jones Industrial Average has risen to a new record, while the benchmark S&P500 and growth-driven Nasdaq Composite are up 24% and 43% year-over-year, respectively, since the closing bell on December 19.

While the rally over the past eight weeks has been broad-based, it is the Magnificent Seven that have done most of the work on Wall Street since the start of the year.

A bull statue placed in front of three volatile stock charts that emerged from a financial newspaper. A bull statue placed in front of three volatile stock charts that emerged from a financial newspaper.

Image source: Getty Images.

The Magnificent Seven consists of the seven largest publicly traded companies by market capitalization in the US:

AAPL chartAAPL chart

AAPL chart

The reason the Magnificent Seven have performed so substantially this year is because of their respective impenetrable moats and/or competitive advantages.

  • Apple has the largest capital return program in the world and is the largest smartphone provider (by a mile!) in the US

  • Microsoft’s Windows still dominates desktop operating systems, while Azure is No. 2 globally in spending on cloud infrastructure services.

  • Alphabet’s Google is virtually a monopoly, with nearly 92% of the global Internet search share as of November.

  • Amazon’s online marketplace brought in about $0.40 of every $1 spent on online retail sales in the US in 2022.

  • Nvidia’s graphics processing units (GPUs) account for between 80% and 90% of the GPUs currently deployed in high-compute data centers.

  • Meta Platforms owns the world’s best social media real estate (led by Facebook) and attracted nearly 4 billion monthly active users in the third quarter.

  • Tesla is the largest electric vehicle (EV) manufacturer in North America and the only EV pure play that is currently profitable.

The groundbreaking innovation and continued dominance of these seven companies is not lost on Wall Street and its analysts. Based on the high-water price targets of a select group of analysts, three stocks of the Magnificent Seven have upside of 50% to 122% through 2024 (and beyond).

Nvidia: implicit advantage of 122%

Although shares of semiconductor stock Nvidia are up nearly 240% so far this year, at least one Wall Street analyst expects another triple-digit increase.

According to Hans Mosesmann of Rosenblatt Securities, Nvidia could reach $1,100 per share, which would mean a 122% gain for the company’s shareholders. If Mosesmann is right, this would also add another $1.5 trillion to Nvidia’s market cap.

It’s absolutely no secret that the buzz around Nvidia has to do with its ties to the rise of artificial intelligence (AI). Analysts at PwC estimate that AI could add $15.7 trillion to the global economy by the turn of the century. Nvidia is cementing itself as the infrastructure backbone of this nearly $16 trillion opportunity.

Nvidia’s A100 and H100 AI-powered GPUs could potentially surpass a 90% share of AI-accelerated data centers by 2024. Although chip-on-wafer-on-substrate (CoWoS) capability has held back A100 and H100 GPU offerings for much of the time. the current year, chip manufacturing giant Taiwanese semiconductor manufacturing has increased its CoWoS capacity, paving the way for Nvidia to significantly increase production in the new year.

However, Nvidia’s newfound success may come with an ironic problem. You see, most of Nvidia’s data center revenue growth through the first nine months of the current fiscal year was driven by the scarcity of A100 and H100 products and truly exceptional pricing power. As Nvidia ramps up production and new competition enters the arena (ahem, Advanced micro devices), Nvidia is in danger of losing most of its pricing power. In other words, Nvidia’s gross margin may already have peaked.

Furthermore, there hasn’t been a next-big-thing investment in thirty years that hasn’t endured a period of unsustainable euphoria early in its rise – and AI is unlikely to be the exception. Most companies are still trying to figure out how to use AI solutions to their advantage. Using history as a guide, Mosesmann’s $1,100 price target for Nvidia is highly unlikely to be reached in 2024.

Microsoft: implicit advantage of 61% (over three years)

The second Magnificent Seven stock with a mouthwatering upside, based on a Wall Street analyst’s forecast, is technology stock Microsoft.

Analyst Joel Fishbein of Truist Securities was recently named the second-largest publicly traded company by market capitalization, with a $600 price target for the next three years. Should Fishbein’s prediction come true, Microsoft’s shares would rise 61%, with the company adding nearly $1.7 trillion in market capitalization.

It should come as no surprise that Microsoft’s growing investments in AI are the main driver of Fishbein’s lofty price target. Microsoft has invested billions in OpenAI, the company that introduced the world to ChatGPT a year ago. OpenAI also played a key role in integrating AI into Microsoft’s search engine, Bing.

Additionally, Microsoft quickly introduced generative AI solutions for its cloud infrastructure services customers through Azure. Generative AI solutions are especially useful for businesses because they can tailor marketing to specific customers, provide virtual agents/chatbots that can answer customer questions, and even provide solutions to supply chain inefficiencies. It’s no wonder Azure is gaining traction in cloud infrastructure services.

However, Microsoft’s existing segments still play a key role in its success. Although Windows is no longer the growth engine it was twenty years ago, it is still the dominant global computer operating system. The high margins and abundant cash flow that Microsoft gets from its legacy businesses provide the company with capital to take risks, for example by making acquisitions or investing aggressively in new trends such as AI.

While Microsoft should have no trouble maintaining a low double-digit growth rate, the company’s stock currently appears fully priced for future success (29 times forward earnings). This makes Fishbein’s $600 price target for the next three years a potential range.

An Amazon driver leaning out of a van window to talk to a colleague.An Amazon driver leaning out of a van window to talk to a colleague.

Image source: Amazon.

Amazon: implicit 50% benefit

The third Magnificent Seven stock with a lot of upside potential in 2024 (and possibly beyond) is e-commerce giant Amazon.

The world’s largest online retailer is expected to reach a price of $230 per share, according to Redburn Atlantic analyst Alex Haissl. Should Haissl’s prediction come true in the new year, Amazon’s shares would rise 50% and its market capitalization would increase by almost $790 billion.

The likely catalyst behind Haissl’s aggressive price target for Amazon is the company’s fast-growing cloud infrastructure services segment. Although Azure is gaining some ground, Amazon Web Services (AWS) remains the world’s largest provider of cloud infrastructure services by spend (31% share). Given that enterprise cloud spending is still in the very early stages of expansion, there is reason to believe that AWS can drive significant operating cash flow growth for Amazon in the coming years.

Amazon’s other fast-growing support segments offer another reason to be optimistic about the future. For example, Amazon attracts more than 2 billion unique visitors to its site every month, making it one of the most visited sites in the world. This makes the company a logical choice for advertisers who want to convey their message(s) to motivated shoppers. It’s the perfect recipe for strong ad pricing.

Similarly, Amazon surpassed 200 million global Prime subscribers in April 2021. The steady expansion of the company’s e-commerce platform, coupled with acquiring the exclusive rights to Thursday night footballlikely increased Prime’s subscriber count significantly.

The final selling point for Amazon is the company’s valuation. While its trailing-twelve-month price-to-earnings ratio of 81 is enough to make even the most aggressive growth investors cringe, its multiple-to-cash flow (14) for the next few years is lower than at any time since it became a publicly traded company. Of the Magnificent Seven stocks with the greatest upside potential in 2024 (and beyond), Amazon is likely to hit its high-water price target.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Sean Williams holds positions at Alphabet, Amazon and Meta Platforms. The Motley Fool holds positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, Tesla, and Truist Financial. The Motley Fool has a disclosure policy.

3 ‘Magnificent Seven’ Stocks Up 50% to 122% in 2024 (and Beyond), According to Select Wall Street Analysts, originally published by The Motley Fool

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