Yahoo Finance Mag 7 stocks including Apple and Amazon still holding strong
The "Magnificent Seven" accounted for around two-thirds of the S&P 500 (^GSPC) gains last year, but can they repeat those extraordinary returns this time around?
Profits for the "Mag 7" are forecast to rise 38% in the first quarter from a year ago, dwarfing the overall S&P 500’s 2.4% anticipated year-over-year earnings growth, according to Bloomberg Intelligence data.
This group of mega-cap tech companies — Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA) — are capitalising on tech growth trends such as artificial intelligence (AI) and cloud computing.
In 2023, Magnificent Seven stocks surged between 48% and 239%, accounting for some 60% of last year's 24% total return for the S&P 500.
Here’s how the mega caps performed this first quarter and what Nvidia is expected to deliver when it reports next week.
Tesla (TSLA) — reported 23 April
Tesla reported a 9% drop in first-quarter revenue, the biggest decline since 2012, and missed analysts’ estimates, as the electric vehicle company weathers the effect of ongoing price cuts.
The electric vehicle (EV) maker said it had made $1.13bn (£910m) over the first three months of the year, compared with $2.51bn a year earlier.
CEO Elon Musk said on the call that the company plans to start production of new models in “early 2025, if not late this year,” after previously expecting to begin in the second half of 2025.
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“We slightly raised our 2024 deliveries forecast, versus our prior forecast for no growth. Our improved outlook is due to Tesla’s recent price cuts, so we also slightly reduced our near-term automotive gross margin forecast. We think Tesla could cut prices further as management aims to pass along the majority of cost savings to customers to drive demand,” said Morningstar analyst Seth Goldstein.
Meta Platforms (META) — reported 24 April
Meta beat analysts' expectations on the top and bottom lines with its first quarter earning but a disappointing Q2 forecast gave investors the chills.
Total revenue rose 27% to $36.5bn and Meta forecast a slight improvement in the current March-June quarter. The Facebook owner reported earnings per share of $4.71 in the quarter.
However, looking ahead, Meta says it will see second quarter revenue between $36.5bn and $39bn, falling short of midpoint estimates of $38.24bn.
Meta said it had raised the high end of its full-year capital expenditure guidance from $37bn to $40bn in order to “continue to accelerate our infrastructure investments to support our artificial intelligence (AI) roadmap”. It added that it expected capital expenditures to “continue to increase next year”.
Read more: Meta, Apple are investing in tech that can decode your thoughts
Meta stock has had a strong performance, climbing 131% over the last 12 months and more than 39% year to date.
However, it lost $132bn in market cap after its earnings, and several analysts lowered their target prices following the report. It is the only Mag 7 constituent that has failed to impress markets.
Microsoft (MSFT) — reported 25 April
Microsoft’s heavy bet on AI appears to be paying off as the world’s largest public company reported $61.86bn revenue for the last quarter.
Total revenue increased 17% to $61.86bn during the first three months of 2024, the third quarter of its financial year, surpassing analyst expectations of some $60.88bn. Earnings per share increased 20% to $2.94, ahead of the expected $2.83.
"Microsoft’s AI-powered earnings demonstrate that doubling down on innovation is paying off," Jeremy Goldman, senior director of briefings at Emarketer, told Reuters, pointing to the company's early moves in generative AI, such as its large investment in ChatGPT maker OpenAI.
Read more: Microsoft to invest €4bn in French cloud and AI services
Sales in Microsoft’s cloud division, its biggest revenue driver that includes its Azure computing platform, climbed 21% during the quarter to $26.7bn, compared with analysts’ forecasts for $26.2bn and above company guidance.
“Wide-moat Microsoft continues to deliver with strong third-quarter results, topping both our top- and bottom-line estimates. Results are impressive from most angles, but we highlight strength in AI, Azure, and gaming; a surge in bookings from large Azure deals; and robust margin performance despite downward pressure from the Activision acquisition are our key takeaways,” said Dan Romanoff, equity research analyst at Morningstar.
Alphabet (GOOG,GOOGL) — reported 25 April
Alphabet’s first-quarter revenue jumped 15% as Google’s parent company announced its first-ever dividend of 20 cents a share alongside a $70bn (£56bn) stock buyback.
Google posted $80.5bn in revenue for the first quarter of 2024 and reported $1.89 in earnings per share, up from $1.17 – beating analysts’ expectations on both counts.
The company also announced its first dividend, of $0.20 per share, and said the payout would become quarterly.
“Our leadership in AI [artificial intelligence] research and infrastructure, and our global product footprint, position us well for the next wave of AI innovation,” CEO Sundar Pichai said in the earnings release.
Read more: Google-backed Anthropic releases Claude chatbot across Europe
“Alphabet is taking a tougher stance on costs than its AI rival, continuing to cut headcount and consolidating teams to blunt the impact of infrastructure investments on profitability. Meanwhile, search advertising increased 14%, YouTube advertising surged 21%, and the cloud business also delivered impressive growth, with revenue up 28%, the best result in more than a year,” according to Michael Hodel at Morningstar.
Amazon (AMZN) — reported 30 April
Amazon reported better-than-expected earnings and revenue for the first quarter, driven by growth in advertising and cloud computing.
The earnings sent shares of the retail giant up as much as 5% in pre-market trading.
Amazon posted profits of $10.4bn (£8.3bn) in the first three months of 2024, up from $3.2bn during the same period last year.
First-quarter sales increased 13% to $143.3bn, driven by strong retail sales in North America and rapid growth across Amazon Web Services (AWS), its digital infrastructure division. Net income more than tripled to $10.4bn in the first quarter.
Sales at AWS accelerated 17% in the first quarter to $25bn, topping Wall Street’s forecast for sales growth of 12% to $24.5bn.
The company expects revenue of $144bn to $149bn for the current quarter ending June.
Read more: Amazon to invest $1.3bn in France, create 3,000 jobs
CEO Andy Jassy told analysts that for Amazon "there is a big opportunity in front of us" in servicing AI customers.
Amazon has been expanding its physical footprint in Europe and has just made a commitment to invest €1.2bn in France, which will go toward creating more than 3,000 jobs and increasing the company’s footprint in the country.
France has also secured investment from Microsoft, with the mega cap committing €4bn toward expanding its cloud and AI infrastructure in France, in addition to funding AI skilling and support for France’s technology industry. It is pursuing a similar strategy in the UK.
Mamta Valechha, equity research analyst at Quilter Cheviot, said: “Amazon is a much-loved name with expectations increasing into results given strong performances from other cloud names such as Microsoft and Google. But nevertheless, we have a company producing record profits and using these profits to fund the next leg of growth."
Amazon saw its stock surge 81% in 2023 and is betting that generative AI will produce tens of billions in revenue for Amazon Web Services in the next few years.
Amazon aims to be a dominant player in the market despite being slow to invest in this technology.
Apple (AAPL) — reported on 2 May
Apple reported fiscal second-quarter earnings that topped estimates and announced an expanded stock buyback programme.
Apple fell behind in the AI race and while rivals Microsoft, Amazon and Meta spend billions of dollars to support AI infrastructure the iPhone maker is only now making a push.
The company is reportedly nearing a deal with OpenAI for ChatGPT to power new AI features on the iPhone. Rival Microsoft is one of OpenAi's biggest sponsors.
Apple is also said to be in discussions with Google and Anthropic, maker of the Claude AI chatbot, to improve features such as Siri and search.
Apple is also reportedly building its own AI chip for data centres, the vast facilities that power chatbots using remote computer servers.
Read more: Apple set to sell Vision Pro headset outside US
The iPhone maker reported revenue of $90.75bn ($72.22bn) in the first three months of 2024, down 4% from the year before but slightly ahead of consensus estimates for $90.3bn.
Sales of its flagship iPhone were down 10% from the year before to $46bn, compared with $51.3bn the previous year, and sales in China fell to $16.3bn for the quarter, against $17.8bn a year ago.
Apple reported net income of $23.64bn, or $1.53 per share, down 2% from $24.16bn, or $1.52 per share, in the year-earlier period.
CEO Tim Cook attempted to reassure investors about the state of the business in the world's second largest economy, noting that iPhone sales were actually up in mainland China.
"I maintain a great view of China in the long term," he said.
The company also announced another $110bn in share buybacks and raised its quarterly dividend by 4%.
“We project 6% compound annual revenue growth for Apple through fiscal 2028. The iPhone will be the greatest contributor to revenue over our forecast, and we project 3% growth for iPhone revenue over the next five years. We expect this to be driven primarily by unit sales growth, with modest pricing increases,” said William Kerwin, analyst at Morningstar.
Nvidia (NVDA) — reporting on 22 May
The AI boom of these tech mega-caps would not be possible without the chips from Nvidia, with the chipmaker seeing shares surge by 239% last year.
With demand far outstripping supply for its graphics processing units, investors will want to know if Nvidia — the last of the Mag 7 to report — can keep driving the AI-related rally the market enjoyed over the past year.
Nvidia is anticipated to report earnings of $5.49 per share for the current quarter, marking an increase of 403.7% from the same quarter last year.
The earnings are projected to be $23.94 per share and a revenue of $106.05bn for the entire fiscal year, according to TradingView.
Read more: Nvidia rivals gold as shield against inflation, survey shows
Nvidia shares took a hit earlier this week when the investor Stanley Druckenmiller said that he'd slashed his big bet in the chipmaker earlier this year. He said the swift AI boom could be overdone in the short run.
Still, Nvidia is leading the race in the AI "gold rush" and a survey revealed that the stock is rivalling gold (GC=F) as a possible hedge against inflation.
Gold is still seen as the best safeguard against the risk of rising prices, according to 46% of survey participants. But nearly a third said the tech mega caps are their first pick for the role.
Watch: 'Magnificent 7' should remain strong in 2024 - CIO
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