The “Magnificent Seven” are an illustrious group of tech stocks that have made incredible investments over the years. While the chip giant Nvidia leads the way with its monstrous $5.8 trillion valuation, there are others within the group that haven’t skyrocketed in recent times. Some have even underperformed the market this year.
There is one stock in particular within the group that I think is overdue for a big rally, and might be the best of the group to buy today, and that is Amazon (AMZN -0.05%). Here’s why tech stocks could be a slam-dunk buy right now.
Image source: Getty Images.
Amazon suddenly seems ridiculously cheap
It hasn’t been uncommon to see Amazon stock trading at incredibly high earnings multiples in the past. Although its recent earnings numbers have been boosted by investments in other companies, the stock’s valuation in terms of earnings remains incredibly low compared to its average over the past decade.
AMZN PE ratio data by YCharts
There have been fluctuations along the way, but for much of the last decade, the tech giant has traded at more than 50 times earnings – a far cry from today.
Since the start of 2024, Amazon’s stock is up 65%, narrowly outperforming the S&P 500 over this period, up 63%. A larger recovery is arguably warranted for Amazon, especially given its strong growth opportunities related to artificial intelligence (AI).
The company is in the early stages of its AI growth story
For years, Amazon Web Services (AWS) has been the main driver of growth for Amazon’s stock. This line of business remains strong: the segment grew 37% during the company’s June quarter, while the overall business delivered revenue growth of 20%.
Today’s change
(-0.05%) $-0.12
Current price
$251.40
Key Data Points
Daily scope
$250.18 -$254.53
52 week range
$196.00 -$287.20
Volume
106.5K
Average flight
39.2 million
Gross margin
50.77%
Not only does AWS look more promising thanks to AI, but Amazon has also seen encouraging growth in its emerging chip business. The company reported triple-digit growth for both its chip business and AWS’ AI business. Both have annual revenues in excess of $25 billion.
Amazon may already be a giant with $776 billion in revenue over the past four quarters, but it’s still growing and AI could usher in the next phase of its growth. It arguably deserves to trade at a much higher earnings multiple given its massive growth opportunities, which is why I think it’s high time it experiences a big rally. Now might be a great time for long-term investors to just buy this Magnificent Seven stock and forget about it.
Gn bussni
