Three ‘Magnificent Seven’ Stocks Up 50% to 125% by 2024, According to Wall Street Analysts

By | December 21, 2023

A rising stock chart on a mobile device and a stack of $100 bills.

While 2022 was one of the worst years in recent history for many investors, the market recovery of the past year has provided welcome relief. The Nasdaq Composite has contributed to the lead, up 42% so far in 2023, and is just 7% below the all-time high (at the time of writing). Once the index crosses that benchmark, it will have ticked off the final criteria needed to signal the arrival of the new bull market.

Still, the recovery has been remarkably uneven. While a large number of stocks are still struggling to gain ground, the so-called Magnificent Seven (listed in alphabetical order below) have outperformed the broader market by a wide margin so far this year (returns are as of market close at Friday):

  • Alphabet: 50% up

  • Amazon (NASDAQ: AMZN): 78% up

  • Apple: 52% up

  • Metaplatforms: Up 177%

  • Microsoft: Up 54%

  • Nvidia (NASDAQ: NVDA): Up 235%

  • Tesla (NASDAQ: TSLA): Up 106%

Even after this year’s stellar performance, some Wall Street analysts suggest that three of these stocks still have significant upside potential and could rise between 50% and 125% over the course of 2024.

A rising stock chart on a mobile device and a stack of $100 bills.A rising stock chart on a mobile device and a stack of $100 bills.

Image source: Getty Images.

Magnificent Seven buy no. 1: Tesla (50% implicit advantage)

There’s no denying that Tesla has revolutionized the automotive industry, driving mainstream adoption of electric vehicles (EVs). In fact, Tesla did in 2023 what would have been unthinkable just a few years ago. The company’s most popular car, the Model Y, crashed through the glass ceiling to become the best-selling car in the world. To put the icing on the cake, Tesla was the first electric car ever to achieve this distinction, according to auto industry publication GreenCars.

Final numbers are not yet known, but Tesla is expected to sell 1.8 million cars this year, which would represent growth of about 38% – remarkable considering the economic headwinds of the past few years. Longer term, Tesla is working to increase car production at a compound annual growth rate of 50%. Once economic headwinds subside, demand is likely to increase.

Despite Tesla’s big gains so far this year, Morgan Stanley Analyst Adam Jonas is still remarkably optimistic and maintains a buy rating on the stock with a price target of $380, implying an additional 50% upside. He believes investors are underestimating the potential of Tesla’s ancillary services, including batteries and full self-driving. Furthermore, he suggests that the competition is being outpaced and that Tesla will continue to capture even greater EV market share.

Tesla remains a battleground stock. Of the 47 analysts who issued a recommendation in November, 18 rated the stock a buy or strong buy, 21 rated it a hold and 8 suggested sell, with most citing the stock’s frothy valuation. That’s certainly worth considering, considering Tesla is currently selling for 9 times sales. That said, it’s a significant discount to Tesla’s three-year average price-to-sales ratio of 15.

To be clear, Tesla stock won’t be for everyone, but for those willing to take on a little extra risk, a little bit can go a long way.

Magnificent Seven buy #2: Amazon (58% implicit benefit)

There’s a lot to like about Amazon, especially the diverse nature of the company’s business interests. Amazon is not only a leader in digital retail and cloud infrastructure, but also a growing force in online advertising. Despite the challenges of recent years, Amazon has a solid foundation on which to build its future growth.

Amazon, for example, remains the undisputed leader in e-commerce, holding about 38% of the market last year, according to online data provider Statista. For context, that’s more than the next 14 digital retailers combined. The improving economic environment will undoubtedly boost Amazon’s fortunes as consumers breathe a sigh of relief and resume their historic spending habits.

A bar chart shows that Amazon has 38% of the e-commerce market, leaving all other competitors behind. A bar chart shows that Amazon has 38% of the e-commerce market, leaving all other competitors behind.

Image source: Statista.

Companies have also reined in their spending in 2023, which has negatively impacted Amazon’s cloud business. Additionally, Amazon maintained its position as the No. 1 provider of cloud infrastructure services during the recession, with a 31% market share in the third quarter, according to market analyst Canalys. The rise of generative artificial intelligence (AI) over the past year represents an attractive opportunity for Amazon, as the company expands the list of AI services it makes available to its cloud computing customers.

Even after Amazon’s robust performance so far this year, Redburn analyst Alex Haissl believes there is much more to come for the company. The analyst maintains a buy rating on the stock and a $230 price target, implying an additional upside of 53%. He suggests the market is underestimating how quickly Amazon’s growth will resume, saying: “The prospects for Amazon are exceptional.”

The analyst is not alone with his bullish outlook. Of the 54 analysts who issued a recommendation in November, 53 rated the stock as buy or strong buy not one recommended sale. That’s remarkable, considering Wall Street never agrees on anything.

Finally, Amazon’s valuation remains extremely attractive. Even after a significant increase this year, the stock is still selling for about twice next year’s sales. Given the growth potential, that is reason enough to buy the share.

Magnificent Seven Buy No. 3: Nvidia (125% Implied Advantage)

The strong and growing demand for generative AI has been the big technology story of the year, and nowhere is that more evident than at Nvidia. As the gold standard in machine learning and other established AI areas, the company has quickly moved to adapt its technology to usher in this latest generation of algorithms.

Not content to rest on its laurels, the company released the H200 Tensor Core GPU, specifically designed for the rigors of AI processing. The new AI superchip delivers “nearly double the capacity and 2.4x more bandwidth compared to its predecessor, the Nvidia A100.”

After two consecutive quarters of triple-digit year-over-year growth, management is aiming for more of the same. Nvidia is calling for $20 billion in revenue, up 231% year over year, fueled by record AI adoption.

These results pushed Nvidia shares higher this year, but Rosenblatt analyst Hans Mosesmann said he believes there is plenty more upside potential ahead. The analyst maintains a buy rating on Nvidia with a $1,100 price target, suggesting the stock could rise 125% from here. The analyst cited the company’s triple-digit revenue growth and said performance of that caliber is “unprecedented.”

He also believes that investors are underestimating the trend of data centers to adopt more robust processors to handle the rigors of AI and high-performance computing. With an installed base estimated at $1 trillion, this suggests there are many upgrades ahead, with Nvidia leading the way.

Of the 53 analysts who issued a rating in November, 51 rated Nvidia a buy or strong buy, and Not one recommended sale.

Many investors will point to Nvidia’s valuation as a reason to avoid the stock, but that view is short-sighted. The stock trades at a price/earnings growth ratio (PEG ratio) of less than 1, compared to more than 2 for the S&P500. By means of That valuation metric – which takes into account its outsized growth – it is the cheapest of all Magnificent Seven shares.

The rapid adoption of AI is just beginning, which should drive Nvidia’s growth in the coming years.

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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. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Alphabet, Amazon, Apple, Carvana, Meta Platforms, Microsoft, Nvidia and Tesla. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Best Buy, Costco Wholesale, Home Depot, Meta Platforms, Microsoft, Nvidia, Target, Tesla, and Walmart. The Motley Fool recommends Kroger and eBay and recommends the following options: $45 short calls in January 2024 on eBay. The Motley Fool has a disclosure policy.

3 ‘Magnificent Seven’ Stocks Up 50% to 125% by 2024, According to Wall Street Analysts, originally published by The Motley Fool

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