This Year’s Magnificent 7 Stocks: 7 Names to Buy Now
The Magnificent 7 Stocks have led the market higher for several years. The stocks within this cohort have delivered reliable returns over the long run. Many of the corporations in this group continue to grow and expand their market share.
However, as corporations grow larger, they have fewer unexplored opportunities. Large corporations often face the challenge of decelerating revenue growth on the path to becoming mature companies.
Smaller stocks have a chance to outperform the previous leaders. Smaller corporations can achieve higher revenue and earnings growth rates and have large addressable markets waiting to be explored.
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Investors should look beyond the Magnificent 7 for compelling stock picks, and these growth stocks have great potential.
Supermicro (SMCI)
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Nvidia (NASDAQ:NVDA) captivated investors in 2023 and Supermicro (NASDAQ:SMCI) looks ready to do the same this year. Elevated guidance implies the company will more than double its revenue year-over-year.
The higher guidance resembles how Nvidia significantly bumped its guidance and generated substantial demand for its artificial intelligence solutions. The stock is up by over 60% year-to-date and has outperformed Nvidia with its 1-year and 5-year stock gains.
Supermicro offers critical server and storage solutions that can handle the workload of artificial intelligence tools. Big tech companies seeking to invest in artificial intelligence will need companies like Supermicro for their AI tools.
Even GAAP diluted earnings per share experienced a significant upgrade in the new guidance. Prior guidance came in at an EPS between $3.75 and $4.24 while the new guidance calls for $4.90 to $5.05 in earnings per share. This significant upgrade came less than two weeks before Supermicro’s earnings date. Significant acceleration may become a norm for Supermicro in 2024.
Broadcom (AVGO)
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Broadcom (NASDAQ:AVGO) is another beneficiary of artificial intelligence. It’s a common trend investors will find among Magnificent 7 Stocks and the “up and coming” Magnificent 7 Stocks.
Broadcom isn’t exactly up and coming. The tech giant already has a large presence in semiconductors and software. The firm produces an AI chip that is rapidly getting adopted and can potentially reach a $1 trillion market cap within a few years.
Broadcom offers investors a 27-forward P/E ratio and a 1.70% dividend yield. Continued growth in artificial intelligence can help the company reach new heights and reward long-term investors.
Broadcom revenue only inched up by 5% year-over-year in the third quarter of fiscal 2023. Net income increased by 5% year-over-year. Broadcom is repurchasing shares to elevate the stock price and reward long-term investors. The company’s net profit margins sit near 40%.
The stock has certainly performed like a Magnificent 7 Stocks over the years. Shares are up by 105% over the past year and have gained 361% over the past five years.
Arista Networks (ANET)
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Arista Networks (NYSE:ANET) has also performed like a Magnificent 7 Stock for long-term investors. Shares are up by 113% over the past year and have gained 380% over the past five years. The company has profit margins that hover near 40% and a 36-forward P/E ratio.
Arista Networks is a cloud networking company that primarily works with corporations. Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT) are the company’s two largest customers. Arista Networks has a total of 8,000+ cloud customers worldwide. The company helps businesses increase their productivity, agileness, automation, and security.
The third quarter of 2023 was another successful showing for the tech company. Revenue increased by 28.3% year-over-year while GAAP net income increased by 54.0% year-over-year.
The press release features some comments from CEO Jayshree Ullal who stated that customer momentum “remained strong in both enterprise and cloud/AI sectors.”
Cloud computing and artificial intelligence seem to be the driving forces behind most of the Magnificent 7 Stocks. Arista Networks also has those tailwinds and is likely to reward long-term shareholders in the years ahead.
ServiceNow (NOW)
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ServiceNow (NYSE:NOW) is another leading cloud computing stock that has over 8,100 customers. The company now has a 99% renewal rate among its customers which is an improvement from last quarter’s 98% renewal rate.
ServiceNow’s customers have deep pockets and a strong need for the company’s software. The cloud giant has roughly 85% of all Fortune 500 corporations as its customers and has 11 product lines generating over $250 million in annual revenue.
The firm makes most of its revenue from subscriptions. ServiceNow reported $2.365 billion in subscription revenue in the fourth quarter which is a 25.5% year-over-year improvement in constant currency. The company closed out 2023 with $8.68 billion in annual recurring subscription revenue. The company achieved the same growth rate across the entire year — 25.5% — as it did in the 4th quarter.
Just like Arista Networks, ServiceNow is also benefitting from artificial intelligence. ServiceNow CEO Bill McDermott shared this remark in the press release: “Generative AI is injecting new fuel into our already high‑performing engine. This is a breakthrough moment.”
Artificial intelligence feels like a multi-year mega trend that still has plenty of room to run. ServiceNow is positioned to benefit from the AI boom.
Visa (V)
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Visa (NYSE:V) isn’t deeply intertwined with artificial intelligence like most of the stocks on this list. However, the fintech company earns a spot on this list due to its consistent returns over the years. Shares have gained more than 20% over the past year and have almost doubled over the past five years.
Visa recently opened up fiscal 2024 with 9% year-over-year revenue growth and 17% year-over-year GAAP net income growth. The company has steadily grown over time and has maintained net profit margins above 50%.
Those high margins give Visa plenty of flexibility to raise its dividend and initiate share buybacks. Visa more than doubled its dividend payout from 2019 to 2023 and continues to hike the dividend payments by over 10% each year.
People will continue to use their credit cards in a slowing economy which gives Visa a healthy combination of growth and stability.
MercadoLibre (MELI)
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MercadoLibre (NASDAQ:MELI) is an e-commerce and fintech juggernaut based in Argentina. The firm has done its part in keeping up with the Magnificent 7 Stocks. MELI shares are up by 46% over the past year and have gained 377% over the past five years.
MercadoLibre continues to deliver exceptional revenue and earnings growth. The company reported 39.8% year-over-year revenue growth in the third quarter of 2023. Net income jumped by 178.3% year-over-year.
MercadoLibre has over 120 million daily active users which is up by 36.4% year-over-year. The firm does most of its business in Latin America, a region experiencing higher growth than most of North America and Europe.
Many analysts are encouraging investors to load up on the stock. MELI has a “Strong Buy” rating on TipRanks based on the price targets from 12 analysts. The highest price target is $2,020 which implies a 16% upside. The average price target of $1,815.50 implies a 4.50% upside.
Crowdstrike (CRWD)
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Crowdstrike (NASDAQ:CRWD) is a rapidly growing cybersecurity giant that has amassed a $70 billion market cap. An 181% run-up over the past year has attracted many investors who believe shares can march higher.
The only weakness with this stock is its 81-forward P/E ratio. This stock is more volatile than most equities and can get dragged down during a correction. However, investors who buy and hold CRWD with a 5-year or a 10-year horizon have less to worry about.
Crowdstrike delivered strong financials in the third quarter of fiscal 2024. Annual recurring revenue grew by 35% year-over-year to reach $3.15 billion. Revenue for the quarter reached $786.0 billion and was also up by 35% year-over-year.
Crowdstrike also achieved record profitability with $26.7 million in net income. It represents a 148.5% year-over-year increase. Crowdstrike is currently sitting on $3.17 billion in cash which can help with making new acquisitions in the future.
Cybersecurity is a fundamental component of the digital web. Many hackers are trying to steal sensitive data and use ransomware to make demands. More businesses will turn to cybersecurity solutions like Crowdstrike to defend themselves.
On this date of publication, Marc Guberti held long positions in SMCI, AVGO, ANET, and NOW. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.
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