The so-called “Magnificent Seven” group of stocks — Apple, Alphabet (GOOGL 4.48%) (GOOG 4.46%), Amazon (AMZN 1.92%), Meta Platforms (META 2.65%), Microsoft, Nvidia, and Tesla — has long traded at a premium to the S&P 500 index. For the past decade, the group has generally traded at a P/E about 30% above the benchmark index, but that premium has recently fallen to its lowest level ever, closer to just 10% above the benchmark. Much of that premium can be attributed to Tesla, which trades at a trailing P/E of over 350.
With the Magnificent Seven trading at its lowest-ever relative valuation, let’s look at my three favorite stocks in the group to buy right now.
Image source: The Motley Fool.
Amazon
The market share leader in both e-commerce and cloud computing, Amazon is one of the most underappreciated stocks in the market today. The stock has been a laggard over the last five years, up only around 35%. However, the company itself has been making big strides during this time.
While it has gotten little credit for it, Amazon has become the world’s largest manufacturer and operator of robots, all of which run on its DeepFleet AI model. It’s also adopted AI to help optimize things like delivery routes and inventory management. This has all made the company much more efficient and helped drive strong operating leverage in its e-commerce business.
Today’s Change
(-1.92%) $-4.90
Current Price
$250.06
Key Data Points
Market Cap
Day’s Range
$248.00 – $258.07
52wk Range
$196.00 – $278.56
Volume
1.8M
Avg Vol
49.4M
Gross Margin
50.60%
Meanwhile, the company is seeing accelerating revenue growth in its cloud computing business, and partnerships with Anthropic and OpenAI should help this continue. Amazon also has a strong chip business, having developed its own AI accelerators and central processing units (CPUs), which help give it a cost advantage.
Trading at a forward P/E of 25.5 times 2027 analyst estimates, the stock is attractively valued and is a solid long-term buy.
Alphabet
Alphabet is not just a search giant; it’s a strong collection of leading and emerging businesses. It’s also become the most complete AI player, having developed its own world-class chips with its Tensor Processing Units (TPUs) and a frontier AI model in Gemini.
TPUs are Alphabet’s secret sauce, giving it a big cost advantage over competitors that rely largely on Nvidia’s expensive graphics processing units (GPUs). It uses its chips to train its AI model at a much lower cost than rivals, while it also lets it run inference much more cheaply. Its TPUs are so well regarded that Anthropic has placed huge orders for them.
Today’s Change
(-4.48%) $-16.61
Current Price
$354.32
Key Data Points
Market Cap
Day’s Range
$352.37 – $375.20
52wk Range
$180.48 – $408.61
Volume
1.5M
Avg Vol
31.3M
Gross Margin
60.43%
Dividend Yield
0.23%
The company’s cloud unit is seeing rapid growth, with revenue surging 63% in Q1, while it has embedded Gemini within Google search, helping drive query and revenue growth. Alphabet also owns YouTube and has a potential future growth driver with its Waymo robotaxi business, which is aggressively expanding to new cities across the U.S.
Trading at a forward P/E of 25 times 2027 estimates, Alphabet is one of my favorite stocks to own for the long term given its built-in advantages.
Meta Platforms
A social media giant, Meta has been one of the best companies at using AI to help drive growth in its core business. It’s developed its own models to help improve its recommendation algorithm, which is feeding users more of the content they are interested in and keeping them on its apps longer. At the same time, it’s using AI to help advertisers better connect with and convert customers, which is driving up ad demand and prices.
Today’s Change
(-2.65%) $-18.02
Current Price
$663.29
Key Data Points
Market Cap
Day’s Range
$660.25 – $681.71
52wk Range
$520.26 – $796.25
Volume
605.8K
Avg Vol
18M
Gross Margin
81.94%
Dividend Yield
0.31%
Meta grew its revenue at a brisk 33% pace last quarter, yet the stock only trades at a forward P/E of 18 times 2027 estimates. The company is also just starting to serve ads on its popular messaging platform, WhatsApp, and its new social media site, Threads, which should add another growth driver.
The biggest knock on the stock has been its aggressive AI infrastructure spending, but Meta looking to start a cloud computing service, given the high demand for compute power, helps allay those fears. Meanwhile, its latest Muse Spark 1.1 model has drawn strong praise.
The stock looks way undervalued given its growth and prospects.
