The so-called ‘Magnificent 7’ group, consisting of Apple AAPL, Meta Platforms META, Alphabet GOOGL, Microsoft MSFT, Tesla TSLA, NVIDIA NVDA, and Amazon AMZN, has been a dominant story within the market for some time, performing remarkably and providing stellar gains.
They’ve led the market, with recent quarterly results from a few members adding further excitement and extending the positive price action.
However, two of the members in particular, Apple AAPL and Tesla TSLA, have come under scrutiny amid considerable underperformance relative to the rest of the group. Below is a chart illustrating the performance of each over the last year.
Image Source: Zacks Investment Research
Given their underperformance, should they be kicked out of the elite club? Let’s take a closer look at how each currently stacks up.
Apple
Apple hasn’t seen any positive earnings estimate revisions over the last several months, with analysts lowering their expectations across multiple timeframes. The stock is a Zacks Rank #3 (Hold).
Image Source: Zacks Investment Research
Concerning headline figures in its latest release, Apple posted quarterly revenue of $119.6 billion, climbing 2% year-over-year. Quarterly EPS totaled $2.18, up 16% from the year-ago mark and reflecting a record. In addition, Services revenue of $23.1 billion reached its highest mark yet and jumped 11.3% from the same period last year.
Apple’s Services portfolio has been an excellent source of growth, helping to decrease its reliance on the iPhone. Nonetheless, shares fell following the report, attributed to demand worries in China. Sales in the region reached $20.8 billion, moving 13% lower year-over-year as the company faces competition in the area.
Slowing growth has undoubtedly been reflected by the recent share performance, with consensus expectations for its current year suggesting 7% earnings growth on a marginal 0.6% sales increase. Still, shares are currently trading at their most oversold levels in years, undoubtedly worth keeping an eye on.
Image Source: Zacks Investment Research
Given the company’s remarkable cash-generating abilities, established customer base, and news surrounding AI, the company’s long-term view remains bright. If positive earnings estimate revisions begin creeping in, shares will likely follow and move higher.
Tesla
Once hailed as the poster child for growth stocks, Tesla’s share performance over the last year has left many investors with a sour taste. Lower margins, hybrid momentum, and competition in China have all been thorns in the side of the company.
Below is a chart illustrating the company’s gross margin on a trailing twelve-month basis.
Image Source: Zacks Investment Research
The weak share performance has coincided with bearishness among analysts, with the company’s earnings outlook moving lower across all timeframes. The stock remains a Zacks Rank #3 (Hold).
Image Source: Zacks Investment Research
Nonetheless, the company continues to be the dominant EV player, with the Model Y becoming the best-selling vehicle in the world throughout 2023. And operations remain sound – Tesla posted $4.4 billion of free cash flow throughout its FY23 and saw its cost of goods sold per vehicle decline sequentially throughout its Q4.
The company’s growth is forecasted to stall slightly in its current year (FY24), with consensus estimates alluding to 1.3% earnings growth on 15% higher sales. Growth resumes in a big way for FY25, as expectations presently suggest a 31% pop in earnings on 20% higher revenues.
The stock remains a prime consideration for those bullish on the long-term EV picture, but analysts’ recent revisions reflect a cloudy near-term outlook.
Bottom Line
The ‘Magnificent 7’ has been on the minds of all investors, whose performance as a group has been remarkable.
Still, two members of the club – Tesla TSLA and Apple AAPL – are beginning to be shunned by the market, with the share performance of each over the last year lagging considerably.
Both Tesla and Apple remain great long-term stocks, underpinned by fundamentals and operational execution. But recent performance has been anything but magnificent, especially when compared to the other members.
It’s worth noting that many of the other Mag 7 members, including Amazon AMZN, NVIDIA NVDA, Meta Platforms META, and Microsoft MSFT, currently boast a much stronger earnings outlook. All four of these members presently sport a bullish Zacks Rank #1 (Strong Buy) or #2 (Buy), reflecting upward-trending earnings estimate revisions.
The remaining member, Alphabet GOOGL, is currently a Zacks Rank #3 (Hold), but has seen positive revisions across multiple timeframes as well.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
