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Fate of the ‘Magnificent 7’ stocks depends on their ability to deliver rapid revenue growth in 2024
Six of the ‘Magnificent 7’ tech stocks have reported 4Q results and all but TSLA exceeded consensus sales estimates. The ‘Mag 7’ outperformance has persisted YTD with the group returning 8% YTD compared with 3% for the S&P 493. Investors often ask us whether the group’s 30x P/E multiple is sustainable given rest of the index trades at 18x. The premium valuation reflects investor expectations the ‘Mag 7’ will post 3-year CAGR sales growth of 12% vs. 3% for the S&P 493. As the Dot Com boom showed, continued outperformance requires stocks to exceed the high bar set by consensus. Although growth expectations are high, if estimates are realized and valuation remains unchanged, the group will outperform.
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