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These Are the Best “Magnificent Seven” Stocks to Buy Right Now, According to Wall Street (Hint: Not Nvidia)

The Magnificent Seven shares are listed alphabetically below. Next to each is the average price target of Wall Street analysts, along with the implied upside of the current stock price.

  • Alphabet: $195 per share (15% increase)

  • Amazon: $220 per share (18% increase)

  • Apple: $200 per share (10% increase)

  • Metaplatforms: $525 per share (11% increase)

  • Microsoft: $475 per share (15% increase)

  • Nvidia: $1,000 per share (11% increase)

  • Tesla: $179.10 per share (3% increase)

Wall Street analysts consider every company in the Magnificent Seven to be undervalued to some degree, but none more so than Amazon, a red-hot artificial intelligence stock that is up 77% in the past year. Here’s what investors need to know.

Amazon reported strong first-quarter results

Amazon exceeded expectations with its first-quarter financial report. Revenue rose 13% to $143.3 billion as advertising and cloud revenue growth accelerated from the previous year. Operating margin increased 700 basis points (7 percentage points), driven in part by efficiency gains from regionalizing the fulfillment network, and GAAP net income tripled to $0.98 per diluted share.

The chart below details sales growth across Amazon’s key business segments.

Chart describing Amazon's first quarter revenue growth across its major business segments.

The chart shows Amazon’s first-quarter revenue growth across its seven major business segments.

Amazon has three main growth engines

The bull case for Amazon centers on its strong presence in e-commerce, digital advertising and cloud computing. To quantify these opportunities, Straits Research predicts that online retail sales will grow 8% annually through 2030. Grand View Research expects digital advertising and cloud computing sales to grow 15% and 14% annually, respectively, over the same period.

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In e-commerce, Amazon operates the largest online marketplace in North America and Western Europe, measured by revenue. Moreover, the company is still gaining market share, even in the United States, where it is expected to account for more than 40% of online retail sales this year. Analysts at Morgan Stanley I believe Amazon could top this Alibaba.com be the largest e-commerce company in the world by 2027.

Amazon has used its momentum in retail to build a thriving digital advertising business. The company will account for three-quarters of U.S. retail ad spending this year, more than 10 times its largest rival. Walmart. Globally, Amazon is the third-largest digital advertiser, and its market share is expected to increase by 180 basis points over the next two years as the company focuses on new opportunities on Prime Video.

Finally, Amazon Web Services (AWS) is the largest provider of cloud infrastructure and platform services. Argus analyst Jim Kelleher sees this as a major advantage when it comes to artificial intelligence (AI). “As a leading provider of infrastructure-as-a-service and other cloud services, AWS is uniquely positioned in the rapidly growing AI-as-a-service market,” he recently wrote in a note to clients.

Granted, AWS lost 1 percentage point of market share last year, while Microsoft Azure gained 2 percentage points of market share, partly due to demand for AI services that came from its partnership with OpenAI. But AWS is partnering with another AI startup in Anthropic, and the company is responding to the demand for generative AI solutions by investing in product development at every layer of the technology stack.

At the infrastructure layer, AWS designs custom AI chips for training and inference that cost less than Nvidia GPUs. At the model tuning layer, AWS launched a generative AI development service Amazon Bedrock, and it just added Anthropic’s Claude 3 Opus to the platform, a large language model that outperforms OpenAI’s GPT-4. Finally, at the application layer, AWS recently introduced Amazon Q, a conversational copilot that can summarize data, answer questions, and automate tasks like coding.

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Here’s how CEO Andy Jassy pitched Amazon Q during the first quarter earnings call:

“Q is not only the most functionally capable AI-powered assistant for software development and data, but also sets the standard for performance. Q has the highest known score and acceptance rate for code suggestions and outperforms all other publicly benchmarkable competitors in catching security vulnerabilities and leads all software development assistants in connecting multiple steps and applying automatic actions.”

Amazon’s investments in developing AI products — from custom chips to Bedrock to Amazon Q — could accelerate cloud services revenue growth, perhaps to the point where the company regains the market share it has lost in recent quarters. Either way, AWS should be a big beneficiary as the AI ​​boom unfolds.

Why Amazon stock is a valuable long-term investment

Going forward, Amazon could achieve low double-digit revenue growth by the end of this decade if it just keeps pace with the e-commerce, digital advertising and cloud computing markets. In fact, Wall Street expects the company’s revenue to grow 11.1% annually through 2026 and 10.9% annually over the next five years. But these consensus estimates leave room for gains if AWS becomes the leading cloud provider for AI workloads.

In that context, the current valuation of 3.3 times sales is relatively reasonable, despite being a premium to the three-year average of 2.9 times sales. I think Amazon has a good chance of beating the market over the next three to five years, and that its chances would improve if the AI ​​boom leads to a material acceleration in cloud services revenue growth. Patient investors should consider buying a small position in Amazon stock today.

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Should You Invest $1,000 in Amazon Now?

Before you buy stock in Amazon, consider this:

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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Trevor Jennevine has positions in Amazon, Nvidia and Tesla. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Tesla and Walmart. The Motley Fool recommends Alibaba Group and recommends the following options: long January 2026 $395 calls at Microsoft and short January 2026 $405 calls at Microsoft. The Motley Fool has a disclosure policy.

These Are the Best “Magnificent Seven” Stocks to Buy Right Now, According to Wall Street (Hint: Not Nvidia) was originally published by The Motley Fool

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