Meet the Cheapest Stock in the "Magnificent Seven" Right Now. Is it a Buy?

Are you on the hunt for the most affordable stock among the "Magnificent Seven"? Look no further! In this article, we'll delve into the world of the seven tech giants—Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla—and uncover the cheapest stock in this elite group. But is it a buy? Let's find out!

First, let's take a closer look at the "Magnificent Seven" and their significance in the U.S. stock market. These seven companies are at the forefront of technological innovation, driving growth in the stock market and representing the future of the tech industry. Their collective market capitalization accounts for a staggering 34% of the U.S. stock market, surpassing the entire G20 nations' combined market capitalization.

Now, let's address the elephant in the room: which of these seven tech giants is the cheapest? Based on the forward price-to-earnings (P/E) ratio, the answer is Tesla (TSLA), with a ratio of 17.4 as of Dec 7, 2024. This is significantly lower than the average forward P/E ratio of the other six stocks, which ranges from 22.3 to 34.5. Additionally, Tesla's forward P/E ratio is lower than its historical average of 24.7 and the industry average of 21.5. This suggests that Tesla may be relatively undervalued compared to its peers and its own historical performance.



But is Tesla's low valuation a reason to buy? To answer this question, we must consider the company's financial performance, particularly its earnings growth and revenue. Tesla's earnings per share (EPS) have grown at a compound annual growth rate (CAGR) of approximately 25% over the past five years. Additionally, the company's revenue has grown at a CAGR of around 20% during the same period. This strong earnings and revenue growth have led to an increase in the company's stock price, with the stock price-to-earnings (P/E) ratio currently standing at around 30, indicating a high valuation compared to the broader market.



Despite Tesla's impressive financial performance, there are still reasons to be cautious. The company operates in a highly competitive market, and its reliance on a single product—the Model Y—poses a significant risk. Additionally, Tesla's valuation is still relatively high compared to its historical averages and industry peers. Investors should carefully consider these factors before making a decision to buy or hold Tesla stock.

In conclusion, while Tesla is the cheapest stock among the "Magnificent Seven" based on its forward P/E ratio, its high valuation and competitive market make it a risky investment. Investors should carefully evaluate the company's financial performance, market position, and competitive landscape before making a decision. As always, it's essential to do your own research and consider seeking advice from a financial professional before making any investment decisions.