The Magnificent Seven – MSFT and META

This last week we've revisited our “Quantamental" analysis of the market's most widely owned and known stocks, focusing on "The Magnificent Seven."

This analysis framework is one we have developed over the last three decades as a professional money manager.

It combines both “quantitative” (technical analysis) and “qualitative” (fundamental analysis). Our goal is to create an analysis framework to gain a quick view of a stock.

This framework begins our analysis process for both TRADING and INVESTING.

Our goal in sharing it is to give a quick view of these leading stocks.

We have reviewed four of "The Magnificent Seven," and today we will continue with our analysis of Microsoft Corporation (NASDAQ: MSFT) and Meta Platforms, Inc. (NASDAQ: META).

Here is a table showing the data from all the analyses we have published on "The Magnificent Seven."

Here is the analysis…

Microsoft Corporation (NASDAQ: MSFT)

MSFT has been one of the most consistent stocks in the stock market over the last decade. This strong performance has continued in 2024.

Here is a stock price chart along with the "relative strength index" (RSI).

We first analyzed the stock this summer and noted that it has been in a strong uptrend. Since hitting an all-time high in early July, the stock has been consolidating and trading sideways.

This pattern is similar to several others in "The Magnificent Seven." We think it is healthy and bodes well for the future.

Now, the stock is neither overbought nor oversold and has traded steadily around these levels since July.

We like the base the stock is building during this period of consolidation and think it is particularly attractive.

MSFT has shown less volatility around its earnings reports relative to its peers.

They reported at the end of July and beat numbers again. In over a decade, the company has only missed numbers three times.

This consistency relative to expectations has led to positive earnings revisions. Here is that chart…

We see the same pattern as its peers. The numbers peaked in 2021 before moving lower throughout 2022 and bottomed out in early 2023. Since then, they have seen steady positive revisions.

In 2024, though, numbers have drifted slightly lower. Given the company's size and stability, this is a mild issue, but we are not that concerned. These negative revisions could also explain the stock's sideways movement.

We think the stock's combination of a consolidation base and a history of beating numbers makes it attractive. We would prefer positive earnings revisions, though, which may limit the stock's upside.

UPDATED CONCLUSION - BUY

Meta Platforms, Inc. (NASDAQ: META)

We published our analysis of META about one month ago and the stock stands out for its performance.

Very quietly, it is the second-best performer among "The Magnificent Seven" and +63% year-to-date, after being +200% in 2023. This is an impressive performance, and we don't think it is widely acknowledged.

Here is a chart of the recent stock price and the "relative strength index" (RSI).

Again – this is an impressive performance. Unlike the other members of "The Magnificent Seven," META stock has been hitting new highs.

After trading down to the $450 level, the stock has rallied almost +30% in the last two months. This has left the stock reasonably overbought, with the RSI coming off a recent high of nearly 80.

Amongst its peers, the stock has shown great volatility around earnings reports. It gapped up at the start of the year when they reported full-year 2023 results and then sold off after Q1 earnings.

Despite this volatility, though, the results have been solid.

The company also has one of the more impressive track records in terms of earnings revisions. Here is that chart…

You can see how the earnings revisions have correlated to the stock.

As much as people talk about CEO Mark Zuckerberg and the controversy around the company, the stock has been incredibly correlated to the earnings revisions.

These numbers have also more than doubled over the last 18 months. This is the second-best performance after NVDA – which is also true of the stock price.

The positive revisions have occurred as the company has been engaged in massive investment spending. As a result, we think that the company is likely to continue beating numbers.

We are impressed with the stock and the earnings performance and think the longer-term outlook is very positive. 

From a tactical perspective, however, the stock is quite overbought. Given the recent volatility around earnings reports, this gives us some pause about their reporting on October 30. As a result, we would NOT buy the stock right now.

UPDATED CONCLUSION – AVOID

In tomorrow's HX Daily, we will conclude our analysis of Apple Inc. (NASDAQ: AAPL) and discuss our takeaways from our complete "Quantamental" analysis of "The Magnificent Seven."