The stock market’s 2023 surge owes much to the “Magnificent Seven” stocks, a group of industry giants known for their innovation and tech prowess. While their stock prices may seem steep, the rewards they offer are undeniable. Investors eyeing these juggernauts may feel like they’ve missed the boat, but fear not.
Among the Magnificent Seven, two standout companies remain excellent investment opportunities. Let’s delve into the world of Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) and Meta Platforms (NASDAQ: META).
Dominance in the Industry
These internet behemoths touch the lives of billions daily. Alphabet boasts six products with over 2 billion users each, with Google Search commanding a staggering 91% global market share. Meanwhile, Meta attracts 4 billion monthly active users to its suite of social media apps, showing a 6% YoY increase in Q4 2023.
With incomparable scale and minimal competition, Alphabet and Meta stand unchallenged. Their powerful network effects and data superiority make them nigh untouchable. These qualities epitomize the exceptional calibre of these companies.
Together, they rake in 57% of the world’s digital ad revenue, poised to grow further. Armed with substantial investments in artificial intelligence, they promise marketers ever-improving targeted advertising capabilities.
Robust Financials
These titans boast impressive revenue and income growth, reflected in their soaring stock prices. Over five years, Alphabet and Meta averaged operating margins of 25.8% and 34.2%, showcasing their substantial profitability.
Generating billions in operating cash flow each quarter, the combined $145 billion net cash on their balance sheets as of Dec. 31 secures them against financial risks. Noteworthy share buybacks have further ramped up their earnings per share, cementing investor confidence.
While Meta recently introduced a modest dividend, buybacks have been their primary mode of shareholder return. This strategic move has substantially reduced their outstanding shares and bolstered EPS.
Act Now, Seize the Opportunity
Despite their recent gains, Alphabet and Meta trade at reasonable valuations, contrary to popular belief.
As of writing, they sport forward price-to-earnings (P/E) ratios of 21.2 and 24.3, respectively. In comparison, the tech-heavy Nasdaq-100 index sits at a higher P/E of 30.3. Surprisingly, these two stocks come in cheaper than their Magnificent Seven peers, making them enticing prospects.
With all these glowing attributes, adding Alphabet and Meta to your portfolio seems like a slam dunk decision.
Should you invest $1,000 in Alphabet right now?
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Suzanne Frey, an Alphabet executive, serves on The Motley Fool’s board of directors. Meanwhile, Randi Zuckerberg, former Facebook director and sister to Meta Platforms’ CEO Mark Zuckerberg, also sits on The Motley Fool’s board. Neil Patel and his clients have no holdings in the mentioned stocks. The Motley Fool has positions in and recommends Alphabet and Meta Platforms, operating under a comprehensive disclosure policy.
The author’s views and opinions expressed here do not necessarily represent those of Nasdaq, Inc.
