The Cheapest Magnificent Seven Stock: Amazon's Value Opportunity for 2025

As the year 2024 comes to a close, investors are looking for undervalued stocks that can provide strong returns in the new year. Among the Magnificent Seven, a group of tech giants known for their dominance and growth, one stock stands out as particularly attractive: Amazon (AMZN). Despite its recent price increase, Amazon offers a compelling investment opportunity for the new year.

Amazon's valuation metrics tell a story of undervaluation compared to its peers and historical averages. Its forward PE multiple of 38x is significantly lower than the group's average of 57x and the industry average of 45x. Additionally, Amazon's PEG ratio of 1.28x indicates that it is undervalued relative to its expected earnings growth. While Amazon's PE multiple might appear elevated, it has the second lowest price-to-free cash flow multiple, only marginally higher than Meta's.



Amazon's growth drivers are diverse and robust, spanning e-commerce, AWS, Amazon Business, pharmacy business, and ad business. While Nvidia (NVDA) has been the top performer among the Magnificent Seven, Amazon's diversified business model and strong cash flows make it an attractive long-term investment. The company's management team, led by Jeff Bezos and now Andy Jassy, has consistently demonstrated a strong focus on long-term growth and innovation. Amazon's capital allocation strategy, which emphasizes reinvesting cash flows into expanding its e-commerce, cloud, and digital advertising businesses, has driven its impressive growth.



Amazon's management team and capital allocation strategy contribute to its growth potential compared to its peers in the Magnificent Seven. The company's aggressive expansion into new markets and its focus on long-term growth make it an attractive choice for investors seeking growth at a relatively lower valuation.

In conclusion, Amazon (AMZN) is the cheapest Magnificent Seven stock, trading at a forward PE multiple of 38x, significantly lower than its peers. Its diversified business model, strong cash flows, and experienced management team make it an attractive investment opportunity for the new year. As the market looks to 2025 with uncertainty, Amazon's undervaluation and growth potential make it a stock worth considering for long-term investors.