JPMorgan analysts are out with a note saying the “Magnificent Seven” tech stocks are not so expensive.
They note the 7 stocks are cheaper in comparison to the broad equity market than they were 5 years ago, citing earnings data
- “There is a concern over the very strong outperformance of the Magnificent Seven, but we note that the group is currently trading less stretched than a few years ago, given earnings delivery”
- The magnificent 7 are again this year driving the disproportionate share of returns, with a clear concern over how sustainable this is, but we note that this group of stocks is not trading increasingly more expensive, at least not in relative terms
The analysts warn that the Seven could experience earnings shortfalls
- they may be more susceptible to economic cycles
- “This is not to say that the group is immune to profit disappointments ahead, but in the case of general earnings disappointment, these stocks could still hold out better than traditional cyclicals”
JPM go on:
- on the broader market growth continues to outperform value, mainly due to its superior earnings performance
- ex-the 7, S&P 500 earnings have shown a decline in recent quarters
- believes there are risks to the consensus view that argues for the re-acceleration in earnings in 2024
- expressed concerns over the high valuation of cyclical stocks, due to potentially weaker consumer trends and the reversal of the previously strong pricing environment
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Magnificent Seven are Microsoft, Apple, Alphabet, Amazon, Nvidia, META and Tesla.
If they are so good why aren’t they called the magnifydollar seven?