[Music] stocks bonds ETFs straight out of downtown Chicago this is Zach's Market Edge welcome to Zach Market Edge the podcast about investing in your life I'm your host Tracy rck and this week we're wrapping up 2024 with a fun podcast on the Magnificent 7 now we all are in them we've all own at least one of them we own them if we own the S&P 500 and um you know that's key but sometimes we want to own them as individual stocks too which ones should you buy for 2025 that's what I want to talk about this week um they've run big here in 2024 so I'm sure some of you are thinking why would I be buying when they're all at their Highs but some of them have still have attractive valuations they aren't the ones that are Skyhigh with pees of 200 or price to sales ratios of 65 those are other tech stocks that's not the mag s so which ones do I like for 2025 and uh what ones should you be thinking about watching for the year especially on any kind of pullback there's only seven of them and let's go over what those seven are because sometimes I have a hard time myself remembering who is a exactly in the Magnificent 7 because we had the Fang we had the fang man and now we have the mag 7 uh that's basically because people wanted to include Tesla but there was no room for it in Fang or fangman because there's no tea so we kicked out Netflix got over uh with Tesla into the mag s and that's how we got this new you know grouping of stocks so if you recall it is Apple Amazon alphabet meta Tesla Nvidia and Microsoft so I always forget Microsoft is in there because that has been one of the uh not so great performers this year even though it is up on the year it hasn't had quite as big a gains as some of the others but should you be buying that one into 2025 um I'm cover three stocks that I really like out of this group of seven and we're going to take a look at some of their fundamentals because that's the story on why I like it but first let's talk about the valuations because everybody is assuming that these stocks are quote unquote expensive but are they really I took a look at the price to sales ratios on all seven of these stocks and it was kind of eye openening to see what those are like now if you remember price to sales ratio of one or less means it's a value and price to sales means I am paying say if it's 7 so it's under one at 7 I am paying 70 cents for every dollar worth of sales so I'm getting them on sale that's why anything under one is considered a value because I'm getting them at that discount but anything just slightly above 2 three 4 that still pretty low even though I am paying more than what the sales actually are to buy those sales but not a lot more so th that's still very attractive but once you get at 10 or higher people start to give a little bit of the side eye why are you paying that much for every dollar worth of sales so I'm paying $10 for every dollar or if it's 20 or 30 or in the case of paler 65 then I'm paying $65 for every dollar worth of sales and then you do have to stop to think why why am I paying that much for that dollar worth of sales is it really worth that much to get that dollar worth of sales now as you know I'm the value stock strategist here at Zachs so I tend to aim more towards the value type of stocks but I like myself a good growth stock too and I do own stocks that trade with price to sales ratios over 10 but you still have to be a little cautious once you get to those levels now a lot of the old-timers will tell you we started to see a lot of the big tech companies get above 10 on the price of sales ratio in 2000 1999 into 2000 and back then everyone was like oh don't worry you know the revenue is there the growth is there I'm buying the growth I don't care if Microsoft's trading at 10 times on the sales but then ultimately the market did care and that's why those stocks took a tumble until the valuations actually got more in line with what the company was producing on sales and earning side of things so keep that in mind you know things can definitely run for a long time at these higher price to sales ratios but eventually valuations do actually matter so so I kept that in mind when looking at the group and I took a look at the price of sales ratios on all of these stocks so let me just read it off um the cheapest is actually Amazon ticker amzn as you know uh 3. 9 is the price to sales ratio so that was the most surprising to me I didn't realize that their price to sales ratio is that low but remember has a lot of different parts to the business it it's got groceries with Whole Foods it's got the marketplace with its website it's got uh AWS so it there's just a lot of things going on there that might result in the price of sales ratio being this low then we have alphabet and they are very attractive at um where's my alphabet 6. 8 so that is under 10 that's pretty cheap as I've talked about on prior podcast when I said hey why isn't Warren Buffett taking a look at alphabet uh I think he should be but it's not at the value it's not under one none of these are but it's still pretty attractive under 10 there at 6.
8 then we had apple and this is a surprise too and maybe this is why Buffett is actually selling some of his Apple because they have a price to sales ratio now of 9. 6 almost at that 10 level that's pretty pricey um for any company but certainly one that's a little slower growing which apple is now so 9. 6 for Apple meta is right at 10 Microsoft uh looking at it now 13.
1 Microsoft so if if 10 was pricey in 2000 is 13. 1 I own Microsoft in my own personal portfolio um I don't know it gave me some pause there when I saw that then we have Tesla 14. 4 that's pretty pricey as well for a car company then if we've rounded off with the one we all know is pricey Nvidia at 29 times but that seems kind of cheap compared to again some of these other Tech names like paler which I mentioned earlier that ticker is pltr it's busted out it's up over 300% this year it's at new Highs but its price to sales ratio is 65 you're paying $65 for every dollar worth Revenue there so 29 that doesn't sound so bad and nvidia's doubling its revenues this year and uh another double digit growth for next year so I'm still liking the fundamentals on Nvidia but it's not among my three Best Buys for next year it it's kind of on the cusp though it would be number four if I was going to do four stocks I I've talked about Invidia a lot this year I still like it it's pulled back 10% off its highs when I'm recording this video so if you can get Nvidia on a correction or a bare Market 20% down uh you might want to take a look because it's cheaper and it still has this growth trajectory I still like it into 2025 and even 2026 so take a look there at Nvidia but let's start and talk about the companies I do think are even better than Nvidia for 2025 and we are going to start with the one I said waren Buffett should be buying its alphabet ticker G I own it in my own personal portfolio I've owned it for about seven years now um but Stock's breaking out to another set of new highs it's year to date up 41% so it's not quite as hot as some of the others in the MA 7 but still outperforming the S&P 500 which is up about 27% on the time I'm recording this so so let's take a look on sex.
com as we always do at what is the fundamentals looking like it's a Zach number three right now it has a B for the Styles score vgm the overall it's got a for growth B for momentum and a c for Value so C is not too bad as I've said with any of these none of them are really cheap where they're going to get an A or a B for Value but alphabet is among the cheapest on various metrics on the mag 7 so I already talked about how it has a pretty low price to sales ratio of 6. 8 its PE is 23. 7 even though it's busting out to new highs Price to Book ratio is 7.
4 I look for three and under for a value stock but 7. 4 isn't terrible on Price to Book and Peg is at 1. 3 and that's because um as you can see I'm showing the price consensus and surprise chart and you see some very nice earnings growth after that turn down in 20122 it's uh you know having this nice um uptick here very steady growth expected it now is paying a dividend it's yielding 0.
4% it's not a lot as those of us know who own it but I I'm getting something they're sending me a check so I'm fine with that um also one of the things I really like about alphabet has been YouTube they did just recently raise the price on YouTube TV outraging many people who get YouTube TV so I'm not sure how that's going to turn out but the advertising on YouTube has been uh just a huge growth engine over the last four quarters YouTube alone has taken in $50 billion in Revenue over those four quarters and the growth is still there so we'll see what happens in 2025 with YouTube but I basically own alphabet for YouTube now and they could spin that off if somehow they um have to divest of certain things in this antitrust case that's going on through the Department of Justice but um if they spun it off I would be happy to be a YouTube owner with just that as a standalone so um alphabet let's take a look at at the detailed earnings because it does have that low PE for these mag sevens so uh yeah 2024 38% earnings growth expected that is coming down for next year just 11% right now but that's still double digits with you know the couple trillion dollar market cap uh on the revenue side um expected to make 294 billion this year 330 next year year these are phenomenal numbers for a company of this size to do the double digits and again even though the stock is busting out it is very attractive on these valuation metrics it's not overheating right now so that's why I like it um let's take a look just at that price and consensus chart again because we had the earning surprises in there and you can see I like to look at these things of beauty where we're getting the nice double digit earnings growth up and to the right but very steady the analysts um not a lot of surprises there they are pricing in this nice earnings growth and nice for 2026 as well we are not getting that yet on the detailed estimates page because we're not in 2025 but once it turns over you'll see that it's looking like another double digit earnings growth uh from the analysts for 2026 so that's alphabet ticker gol um okay so let's switch to the second one I really like and I used to own this I don't own it anymore it's meta platforms I've talked about how I uh owned Facebook originally I owned it for many years but then when they became meta and they were doing the metaverse I wasn't a big fan I didn't see what the point of that was so I got out like if you don't like the underlying business don't own the company and now they've kind of gone away from that and they're embracing the AI they really have the advertising going they have threads now in in addition to Instagram and WhatsApp is doing well as well so meta kind of transforming itself this year up 76% year-to date kind of quietly because Nvidia has been getting all the um Glory along with Tesla so this year not as many people paying as much attention to meta platform stock and what it's doing but up 76% um I talked about price to sales it's at 10 and PE on this one only 27. 4 so that's pretty cheap Peg of 1. 4 also really cheap remember a peg under one means growth and value so that's really cheap price to book 9.
5 that's not too bad so even though this is busting out to new highs as well it's still pretty attractive on valuations that's why I like it uh it's a three on the Zach rank as you can see style scores also a B for the vgm this is identical to alphab alphabets C for Value a for growth B for momentum and uh that's also why I like it it's not uh you know valuations are not stretched here dividend they're paying one two. three% on the yield so little bit less than on alphabet but you're getting something $2 a share and you can see on the price consensus and surprise they put together nice earning surprise track records since 2023 they haven't missed and then we've got up and to the right as well with the earnings on meta platforms but what does that look like on the detailed estimates page should be double digits as well and this year earnings of 52% Revenue up 20. 9 very nice Revenue growth up to 163.
187 point1 billion up another 14. 7% earnings up 11% for next year but like with alphabet we have the um 2026 on the price of consensus chart and that's looking like another double digigit uh gain on this chart as I just put up just the price of consensus chart and you can see it's nice uh earnings growth again just like with alphabet the analysts are in the no there's not a lot of surprise here it is up and to the right with the nice double digits growth but analysts expecting kind of you know smooth sailing here for 2025 and 2026 but we'll see stock is breaking out as I mentioned but still very attractive here and I'm liking meta platforms for 2025 then my third choice this one I also own so I own out of the mag sevs I own Microsoft Amazon and alphabet and so I just happen to pick two out of the three that I also own but Amazon I'm very surprised at what's going on there this year amazon. com as it still says on Zach because that is what its name is really known as is a Zach number two rank so we've got the buy ranking on the Zach rank which is the short-term recommendation just one to three months style scores it's a little different here because it has a d for momentum but overall score for the vgm is still a b it's a c for value and an a for growth just like the other two but little less on the momentum the D for momentum um scrolling down you can see these charts all look kind of the same right I have to scroll up um it is does say Amazon because if I didn't know better I would have thought this was the meta chart because it had the misses in 20122 as well and it hasn't missed on earnings since the start of 2023 all these charts look the same it's also busting out to new highs it's got the double digigit earnings growth expected for 2025 2026 very crazy that these all look the same now U to date this one's up 53% to this new breakout uh this is a big breakout I feel for Amazon as well because it was kind of just moving sideways a lot during the pandemic it did get to those Highs but then move sideways then it broke down jasse came in as the new CEO did a lot of layoffs uh kind of uh you made some decisions on certain of the businesses and now we're seeing kind of the fruits of that Amazon also taking in a lot of advertising Revenue now so I do like that aspect of what they're doing but they're also getting into AI in different ways through building data centers with AWS in the cloud but also they are developing their own chips and getting into the chip infrastructure in the data centers the liquid cooling the racks all of that I like that they're going into that area because there is an opening and there is a lot of business there uh the data centers are going to be built not just in the United States but globally and that's not going to slow for several years so this is still a very small part of what is their overall business but I like that they're going into these new areas and they're willing to talk about it um they are partnered with some of the big chip companies as well obviously to you know for AWS and to um you know service those C customers they are still with the big chip makers like Nvidia but they are still also you know exploring new avenu in this area of the business so what do the rest of their valuations look like we know they're cheap on the price to sales 3.
9 PE 43. 8 it's always been high but it got down to around 40 before this recent breakout I want to say that's the lowest I've seen Amazon at in in forever basically forever um so that's considered cheap for Amazon on a PE basis PEG ratio of 1. 5 so that's very attractive as well Price to Book 9.
2 also attractive so it just has a slightly higher PE but otherwise I'm still liking um all the numbers there and taking a look at the detailed estimates they are doing double digits uh Revenue growth they're back to that now in 2024 10. 9% to 637 billion next year 76 billion expected another 10.
