Examining Valuations of Major Tech Stocks Amid Market Turbulence

Chicago, IL – April 1, 2025 – Today, Zacks Investment Ideas spotlight Amazon (AMZN), Meta Platforms (META), Microsoft (MSFT), Apple (AAPL), Alphabet (GOOGL), Tesla (TSLA), and Nvidia (NVDA).

The Current State of Big Tech Valuations

The U.S. stock market is enduring one of its most significant corrections in recent years, influenced by uncertain trade policies and downgrading economic growth forecasts. President Donald Trump’s unpredictable tariff policies have left investors and businesses grappling with a volatile environment. Additionally, aggressive fiscal tightening and a diminishing wealth effect have contributed to lowered consumer confidence and gloomy outlooks.

This year has been challenging for major tech firms known as the Magnificent Seven. After leading gains for the past decade, these technology giants are now driving market declines, rekindling discussions about overconcentration in the market and elevated valuations.

While recent declines have not been disastrous, with Tesla being the significant outlier, the decreases are sufficient to bring valuations closer to more sustainable levels. This scenario may present a buying opportunity for long-term investors looking to enter the market. Conversely, if economic conditions worsen and earnings expectations continue to drop, these stocks might still seem overpriced.

In the following sections, we will examine the current valuations, relative performance, and earnings forecasts for the Magnificent Seven: Amazon, Meta Platforms, Microsoft, Apple, Alphabet, Tesla, and Nvidia.

Meta Platforms: Top Performer Among Tech Giants

Meta Platforms stands out as the best performer among the Magnificent Seven, being the only stock currently outperforming the broader market, though it remains down year-to-date.

The stock has a Zacks Rank #3 (Hold) and is projected to achieve an impressive 18.3% annual earnings growth over the next three to five years. Annual sales are expected to increase by 14.8% this year and 13.3% the next.

Shares are trading at 22.5x forward earnings, slightly lower than the company’s 10-year median of 24.7x, indicating a more reasonable valuation compared to its historical levels.

Apple: Largest Market Cap with Slow Growth

Apple is the largest company by market capitalization within the group and has shown the second-best performance year-to-date.

With a Zacks Rank #3 (Hold), Apple’s earnings are projected to grow at a steady rate of 13.8% annually over the next three to five years. However, its near-term sales growth forecasts are modest, anticipating a rise of only 4% this year and 7.7% next year.

Currently, Apple’s shares are trading at 30x forward earnings, a premium compared to the broader market average and its own 10-year median of 21.8x, revealing a high valuation despite the slow growth outlook.

Microsoft: Consistent Growth with Premium Valuation

Microsoft ranks third in performance among the Magnificent Seven and has the second-largest market capitalization in the group.

Holding a Zacks Rank #3 (Hold), Microsoft’s earnings are expected to grow by 14.4% annually over the next three to five years. Sales forecasts predict steady growth of 12.7% this year and 12.9% next year.

The stock is currently priced at 29x forward earnings, slightly above Microsoft’s 10-year median of 27.3x, reflecting strong investor confidence in the company’s consistent growth prospects.

Amazon: Trading at a Historical Discount

Amazon has performed moderately within the group, with shares down over 15% year-to-date.

It holds a Zacks Rank #3 (Hold) and features the third-highest earnings growth forecast among the Magnificent Seven, with expectations for a 22.9% annual increase over the next three to five years. Sales are projected to rise by 9.4% this year and 10.3% the following year.

Despite the downturn, Amazon trades at 30.5x forward earnings, a substantial discount to its 10-year historical median of 87.1x, suggesting a potential buying opportunity for long-term investors.

Alphabet: Offers the Cheapest Relative Valuation

Alphabet has faced significant challenges, being nearly 20% down this year.

Carrying a Zacks Rank #3 (Hold), its earnings are forecasted to grow at an annual rate of 15.6% over the next three to five years. Sales forecasts call for increases of 11.8% this year and 11.2% next year.

Currently, Alphabet is trading at 17.3x forward earnings, considerably below its historical median of 25.8x, which could present a compelling valuation compared to its peers in the group.

Nvidia: Previous Star Now Losing Momentum

Nvidia has been the top performer among the Magnificent Seven over the past couple of years but now ranks as the second-worst performer year-to-date.

It holds a Zacks Rank #3 (Hold) and has the highest expected earnings growth in the group, with projections of 25.7% annually over the next three to five years. Revenue growth is also robust, with anticipated increases of 52.1% this year and 22.7% the next.

Despite this pullback, Nvidia is currently trading at 26.4x forward earnings, suggesting a mixed outlook for investors.