The "Magnificent Seven" stocks, as named by Bank of America analyst Michael Hartnett, refers to an elite group of seven high-performing U.S. tech leaders. These seven combined have been dominating the stock market and headlines ever since the artificial intelligence (AI) frenzy began.
The group includes Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), Tesla (TSLA), Meta Platforms (META) (formerly Facebook), Nvidia (NVDA), and Google's parent company, Alphabet (GOOGL).
Here’s how each Mag 7 stock has performed year-to-date, compared to the S&P 500 Index ($SPX), which has gained 27%:
- Tesla stock is up 91.6%.
- Alphabet stock is up 39.8%.
- Meta stock is up 76.9%.
- Microsoft stock is up 20.2%.
- Amazon stock is up 51.3%.
- Nvidia stock is up 175.4%.
As the year draws to a close, let’s find out why Meta Platforms and Microsoft stocks are still great Magnificent 7 stocks to buy heading into 2025.
#1. Microsoft Corporation
With a market cap of $3.4 billion, Microsoft remains one of the world's most valuable companies. Microsoft, known for its legacy products and services in software, hardware, and cloud computing, has long been a favorite of investors.
Microsoft operates in three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. Microsoft's collaboration with OpenAI has been transformational. The company has now integrated AI into all of its products.
Microsoft Azure ranks second in the global computing market, trailing Amazon's AWS. Microsoft Cloud alone generated $38.9 billion in revenue in the first quarter of fiscal 2025, representing a 22% increase over the previous year's quarter. Total revenue increased by 16% to $65.6 billion, with adjusted earnings up 10% to $3.3 per share.
Microsoft expects Azure and other cloud service revenue to increase by 31% to 32% in the fiscal second quarter, and management expects its AI business to generate more than $10 billion in annual revenue by the second quarter of fiscal 2025. The company generated a free cash flow of $19.2 billion in the most recent quarter. This financial flexibility enabled Microsoft to continue investing in research and development, while also paying out $6.2 billion in dividends and $2.8 billion in share repurchases. MSFT also announced a 10% dividend increase during the quarter.
Analysts who cover Microsoft stock forecast earnings to increase by 10.6% in fiscal 2025 and 15.17% in fiscal 2026. Trading at 30 times forward earnings for 2025, Microsoft stock is expensive. However, I believe Microsoft’s legacy product portfolio, its drive for innovation, and and investments in AI and cloud computing will continue to propel the company's financial performance in the long run.
Overall, on Wall Street, Microsoft stock is a “Strong Buy.” Of the 40 analysts covering the stock, 34 rate it a “Strong Buy,” three recommend a “Moderate Buy,” and three say it's a “Hold.”
The average price target of $504.85 suggests MSFT stock can climb about 12% above current levels. Its Street-high estimate of $600 suggests the stock could potentially climb by 33% in the next 12 months.
#2. Meta Platforms
Meta Platforms, formerly known as Facebook, now owns and operates several of the world's most popular social media platforms, such as Instagram, WhatsApp, Messenger, Threads, and more. These platforms boast billions of active users, which generates advertising revenue for the company.
Valued at a market cap of $1.5 trillion, META stock has outperformed both the S&P 500 Index and the tech-heavy Nasdaq Composite’s ($NASX) year-to-date gain of 34.3%.
Meta is investing heavily in AI to improve content recommendations, enhance user experiences, and optimize ad delivery. These efforts are reflected in Meta's third-quarter results. Meta operates in two segments: the Family of Apps (FoA), which comprises all social media apps and accounts for 99% of total revenue. The Reality Labs (RL) segment includes augmented reality (AR) and virtual reality (VR) technologies. While the FoA segment revenue increased by 18.8%, the RL segment increased by 28.5% due to higher demand for AI-powered Quest headsets and Ray-Ban Meta glasses. Total revenue increased by 19%, while diluted earnings rose 37% to $6.03 per share.
The company's commitment to developing the metaverse is a long-term growth opportunity. The company expects the RL segment's operating losses to rise in 2024 due to ongoing product development efforts and investments. While still in its early stages, the metaverse has the potential to revolutionize various aspects of life, work, and entertainment. It can reshape industries, create new opportunities, and redefine human interaction.
A strong balance sheet should help Meta achieve its goals. The company ended the quarter with $70.9 billion in cash, cash equivalents, and marketable securities, as well as $28.82 billion in long-term debt. It also generated $1.26 billion in free cash flow, and paid out dividends totaling $1.2 billion.
Analysts that cover META predict earnings growth of 52.1% in 2024 and 12.2% in 2025. Trading at 24 times forward earnings for 2025, Meta seems to be a reasonable AI stock to buy now.
Overall, on Wall Street, Meta stock is a “Strong Buy.” Of the 51 analysts covering the stock, 43 rate it a “Strong Buy,” two recommend a “Moderate Buy,” four say it's a “Hold,” and two rate it a “Strong Sell.”
The average price target of $651.74 suggests Meta stock can climb about 5% above current levels. Its Street-high estimate of $811 suggests the stock could potentially climb by 30.6% in the next 12 months.
