2 “Magnificent Seven” Stocks at All-Time Highs I’d Buy Right Now

2 “Magnificent Seven” Stocks at All-Time Highs I’d Buy Right Now

Although it is difficult to say that most of the actions of the “Magnificent Seven” would be bad long-term investments, there are two in particular that I’d be eager to buy right now. Amazon.com (NASDAQ:AMZN) is trading just 2% below its all-time high, but its profitability is still in its early stages.

The other is Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG), the parent company of Google. Alphabet actually just hit a new all-time high as I write this (May 16), and its recent results have given investors something to smile about.

Here’s a look at why I’d buy them both now (I already own Amazon) despite the strong recent performance.

Amazon’s business has been impressive recently

Amazon is a company that needs little introduction, with a dominant share of the US e-commerce market and the leader in cloud services (AWS). Long-term investors have been handsomely rewarded for their patience, but the company could still have plenty of room to grow on both ends.

On the e-commerce side, Amazon.com is the undisputed leader, with a larger US e-commerce market share than its next 10 competitors. combined. But e-commerce now accounts for only about 15% of U.S. retail sales, and even lower percentages in some of the other markets where the company operates. And although Amazon Web Services (AWS) is the cloud services leader, the global cloud computing market represents around $500 billion in 2023, but is expected to reach five times this level by 2032.

Not only does Amazon still have enormous growth potential, but CEO Andy Jassy’s plans to improve efficiency are starting to pay off. In the most recent quarter, Amazon’s operating profit exceeded triple year-over-year, driven by AWS’ particularly strong growth as well as advertising revenue, both of which are high-margin businesses.

An absolute cash machine with room to grow

Unlike Amazon, Alphabet is already an extremely profitable company. Its main subsidiary, Google, owns some of the most dominant platforms and applications in the world, including the massive Google search business, YouTube, Gmail, Chrome, Android and much more. It also owns the Google Cloud business, which is a direct competitor to AWS.

While some of Google’s businesses are quite mature, there’s still plenty of room to optimize its advertising business, which is the primary way its non-cloud business makes most of its money. And we’ve already discussed the massive growth potential for cloud services over the next decade.

You should know that all of Google’s activities have incredible margins. Over the past four quarters, Alphabet has achieved 26% growth. net margin. In 2023, Alphabet generated net income of nearly $74 billion and the company has approximately $108 billion in cash and short-term investments on its balance sheet. So not only does the company have plenty of financial flexibility to capitalize on opportunities, but it’s also returning tons of capital to shareholders through buybacks and just declared its first-ever dividend.

A historic record does not mean the same thing as “expensive”

Certainly, these are not cheap stocks. Alphabet trades at around 30 times forward earnings, and Amazon’s P/E is significantly higher. Together, they have a market capitalization of over $4 trillion.

However, an important concept for investors to know is that a high price does not necessarily mean a stock is expensive. These are two proven winners with great potential for future growth, and I wouldn’t be surprised if both produce market-beating returns in the years to come.

Should you invest $1,000 in Amazon right now?

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Suzanne Frey, an executive 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. Matt Frankel has positions at Amazon. The Motley Fool holds positions and recommends Alphabet and Amazon. The Motley Fool has a disclosure policy.

2 Magnificent Seven Stocks at All-Time Highs I’d Buy Right Now was originally published by The Motley Fool

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