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| By Jim Nelson |
The Mag 7, as a group, is at a crossroads.
But whether the stock group stays together is in question.
The bulk of the “friends” are not just heading to new highs. They’ve also seen their “Buy” ratings restored in recent weeks.
Yet, there’s one that is heading for a breaking point.
Whether that’s a breakdown or a breakout remains to be seen.
The earnings that came out this week only shine a brighter spotlight on the current divergence.
You see, the top performer and the bottom performer are getting more and more out of whack.
Nvidia (NVDA) is clearly still the belle of the ball. It’s up 29.6% so far this year.
Tesla (TSLA) has not had it so good …
It missed analysts’ earnings estimates during the most recent quarter.
That send shares sliding hard on Thursday.
While they recovered somewhat yesterday, it still left a bad taste in investors’ mouths.
That headline might be even more insightful: Tesla’s story, so far, has been “hope based.”
Thus far, investors have been willing to place their faith in the ambitious Elon Musk company.
The clearest example of this is to just look at how it’s valued compared to its Mag 7 peers:
While none of the other tech Giants are especially cheap — though Google’s parent isn’t as insane as the rest — Tesla trades at 138x forward earnings.
That means Nvidia, Amazon.com (AMZN) and Microsoft (MSFT) would have to quadruple in price to trade on par with TSLA.
Or, considering the action we just saw in Tesla’s shares, TSLA would need to drop by about 75% in value to match those three.
That’s a major valuation outlier.
It might not fit in anymore unless something changes.
However, it was just upgraded back to a “Hold” here at Weiss prior to earnings from its temporary “Sell” status.
So, whether that’s a case for its continuance in the Mag 7 or not is still up in the air.
In any case, that’s not where your experts are looking for profits right now. In fact, they have been busy on that front this week …
How to Grab an Extra Credit to Live Overseas
Nilus Mattive has a second way to keep your money from Uncle Sam on your year-long overseas vacation. And yes, he’s still reporting from the beaches of Indonesia.
Run if a Startup Shows Any of These Red Flags
After recently showing you the green flags you want to find in a startup deal, Chris Graebe reaffirms the red flags you definitely don’t want to find in a startup.
Sean Brodrick is following the AI Supercycle closely. Its next push will create a Gold Rush-like rally in one group of stocks. And they don’t even make chips.
These Startups Are Following Amazon’s Footsteps
Amazon became a member of the Mag 7 because it was different. Instead of creating a product, it created a platform for products. There is a group of startups attempting the same thing in the biotech industry.
It's Time to Invest in Open AI — No, Not That One
The companies in the Mag 7 are not immune to competition. And our tech expert, Michael A. Robinson, says it’s time to get in on the top Mag 7 competitor because of what it’s sharing with the AI world.
Have a great weekend!
Jim Nelson
Managing Editor, Weiss Ratings Daily
