A coveted epithet, the “Magnificent 7” – or the Mag 7 – denotes an elite cadre of U.S. technology behemoths. This select group comprising Apple (AAPL), Meta Platforms (META), Amazon (AMZN), Microsoft (MSFT), Nvidia (NVDA), Alphabet (GOOGL), and Tesla (TSLA) has exhibited exponential growth, setting the stock market abuzz with their prowess in cloud computing, artificial intelligence (AI), electric vehicles (EVs), and digital advertising. Esteemed as industry maestros, these titans have spearheaded innovations that have reshaped the tech landscape.
However, a divergent vision emerges with the “Magnificent Six” – a distinction resonating with D.A. Davidson’s managing director and analyst, Gil Luria. Envisioned as torchbearers of the impending AI tidal wave, Luria foresees this tech sextet, sans Tesla, continuing their ascendancy. The integration of AI into their product suites has fostered their meteoric rise since the dawn of the AI revolution. As elucidated by Luria in an interview with Yahoo Finance, the Mag 7 contingent, sans Tesla, is primed to soar in the realms of AI and computation in the forthcoming years.
While Tesla’s classification as a tech or car company remains subject to conjecture, Luria asserts its designation as the latter. Albeit donning the tech mantle, Tesla has faltered in performance this year compared to its Mag 7 counterparts. Here’s a glance at their year-to-date yield juxtaposed with the 17.3% upswing in the S&P 500 Index:
Unveiling the skeletal performance narratives paints a partial picture, warranting a deeper dive.
Unveiling Meta Platforms and Alphabet
Casting an initiation spell, Luria embarks on the coverage of Meta Platforms, endorsing a “buy” verdict with a $600 price peg. Nestling a medley of social media empires under its canopy, Meta Platforms’ daily footprint spans around 3.2 billion users across Facebook, Instagram, WhatsApp, Threads, and more. Diving deeper into the Wall Street melody, Meta stock resonates as a “strong buy” melody with most analysts tipping the scales favorably.
Almost synonymous with social media, Meta Platforms’ revenue kinship garners impetus from its Family of Apps segment abetting nearly 99% of its revenue. Augmented by its Reality Labs’ narrative orchestrating a 27.9% revenue crescendo in AI-infused Quest headsets, Meta Platforms basks in a 22% revenue rise and a robust 73% earnings surge during the second quarter.
Leveraging a robust financial might, Meta’s dalliance with AI fortifies its foothold across the Family of Apps and Reality Labs spectrum, with the metaverse unfurling vistas for prodigious growth intertwined with AI.
Market savants project a 42.9% earnings uptick in 2024 and a 14.8% ascent in 2025 for Meta, saluting it with a mean target of $575.93, flaunting a 9.6% upward voyage over the ensuing year.
Expanding his canvas, Luria delves into Google’s progenitor – Alphabet. Espousing a “neutral” stance with a $170 sticker, Luria tiptoes into Alphabet’s Wall Street symphony, resonating loudly as a “strong buy” sonnet. A plurality of analysts rhapsodize Alphabet with enchanting ratings, with a price target indicating a potential 32% leap within a year.
Beside Google’s search hegemony nesting within the search domain, Alphabet’s soar is buttressed by Google Cloud’s ascendancy. The serenade sung by Search breathing life into a 57% revenue portion during the second quarter, heralds a 13.5% upswing in total revenue accompanied by a 31.2% spike in adjusted earnings per share.
Dwelling as a cloud behemoth’s third herald following Amazon and Microsoft, Google Cloud’s revenue ascends by 28.7% to a megahit $10.3 billion during the second quarter.
Embroidering AI into its flagship armada, Alphabet’s recent epochs echo a tale of meteoric growth. Harnessing AI across its flagship repertoire, Alphabet winds a narrative where 2 million developers are ensconced in its AI tapestry, basking in the cloud’s AI-foray and generative AI innovations.
In CEO Sundar Pichai’s mellifluous words, the company’s AI prowess echoes through a symphony resonating across verticals from chips to agents. Market watchers project a 31.5% earnings upswing in 2024 and a 14.0% leap in 2025 for Alphabet, bolstering its tech saga.
Numbing the gap, Luria fuses Meta and Alphabet into his “compute sector” ballet, aligning them seamlessly with the Mag 6 pantheon. The proclamation of these six colossi erecting their throne in AI and spatial computing, stretching their eminence from desktop and mobile computing to cloud computing and advertising vocations, upholds the mandate of scale, reach, and capital which these magnetos wield adroitly.
Decrypting Tesla’s Prognosis
Mounted atop the EV echelon, Tesla festoons the triptych of “scale, reach, and capital.” Nonetheless, Luria’s vision dons a sober hue as he anoints Tesla a car company. With automobiles fostering nearly 90% of its revenue luminary, Tesla’s aspirations traverse the automotive dominion, precluding its assimilation into the Mag 6 constellation readying to storm the tech firmament amid the impending AI wave.
While Tesla has ventured into energy storage, solar power, and automation beyond its EV leitmotif, automobiles continue to sing the 78% revenue symphony, abetted by recent quarterly struggles with a 7% dip in automobile segment revenues during the second quarter.
Debilitated by fervent competition within the EV arena and broader macro influences, Tesla’s price constraints echo governance pressures, clipping profit margins. Albeit brandishing a short-term adversity optimism by CEO Elon Musk, Tesla’s gallop seems dwarfed relative to its tech kin in the AI surge lurking ahead.
Marking a “hold” moniker on Wall Street’s annals, Tesla stocks huddle amidst an analyst chorus lacing it with various recommendations denoting its uncertain trajectory. Nonetheless, Tesla’s stride supersedes the average price tag of $198.29, flaunting a high-end projection of $310 shadowing a potential 34.8% ascent in the ensuing year.
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