The Magnificent Seven – AAPL and Conclusion

We began our professional analyst and money manager career almost three decades ago.

Over that period, we have refined our analysis process into a hybrid of styles.

We call our analysis framework a “Quantamental” process. It combines quantitative (technical) and fundamental (qualitative) analysis.

We recently created a "quick" version of this process to analyze companies quickly.

We began publishing our "Quantamental” analyses of some of the most well-known and widely owned stocks in mid-July. We started with Tesla Inc. (NASDAQ: TSLA) and, over the next few months, analyzed every member of "The Magnificent Seven.”

With earnings season kicking off, we have updated our analysis of these companies this week. Today, we finish with our analysis of Apple Inc. (NASDAQ: AAPL) and our conclusions on "The Magnificent Seven" as a group.

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

Here is the analysis…

Apple Inc. (NASDAQ: AAPL)

We analyzed AAPL roughly three weeks ago, so not much has happened in that short time.

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

As we discussed in our report three weeks ago, AAPL shares have continued to perform well.

We remember earlier this year when the stock was lagging behind its peers, there were significant concerns about the company. In mid-April, the stock was -14% and many critics said the “chart looked bad” for the stock.

That changed when the company reported calendar Q1 earnings at the start of May. There was nothing unusual in that report. The company beat on both the top and bottom lines—the same way it has been doing for the past several years.

However, we think the stock price fed upon itself. The price created the “news” and the idea that AAPL was going to miss numbers.

Once again, though, AAPL proved the critics wrong.

With positive earnings results for the first two quarters of the calendar year, the company has seen positive earnings revisions recently. Here is that chart…

As we noted in our initial analysis, AAPL is distinctive from its peers with much lower earnings volatility. Both NVDA and META have seen estimates more than double, while the AAPL numbers have moved less than -5%.

This lower volatility, combined with the brand value, has led AAPL stock to perform better than the earnings growth would imply.

We think that not only is “Apple” a globally popular brand name, but the stock itself is a brand amongst investors. This lends support to the share price. The only other stock in "The Magnificent Seven" with the same impact is perhaps with MSFT.

We think the momentum will likely continue, and the stock will go higher.

UPDATED CONCLUSION - BUY

“The Magnificent Seven” – CONCLUSION

This is the first time we have analyzed all of "The Magnificent Seven" stocks as a group.

Here is a quick review of our updated views for each…

1. Tesla Inc. (TSLA) – AVOID

We remain concerned about negative earnings revisions. The company reports on October 23, and we think it is vulnerable with the recent rally in the shares.

2. NVIDIA Corporation (NVDA) – BUY

We have longer-term concerns, but we think the company will continue to report strong earnings. Now that the shares have consolidated over the last five months, we think they move to new highs.

3. Amazon.com, Inc. (AMZN) – BUY

This is another stock that has consolidated now for most of 2024. We think they will continue to report substantial numbers, and the stock will move higher.

4. Alphabet Inc. (GOOG) – BUY – FAVORITE STOCK

This is our favorite amongst “The Magnificent Seven” stocks. The company is reporting strong results yet is -14% from its recent highs on regulatory concerns. We think this is a great buying opportunity.

5. Microsoft Corporation (MSFT) – BUY

This stock looks similar to AMZN and has consolidated throughout most of 2024. It is also the only one of these companies besides TSLA that has seen some mild negative earnings revisions. We think it goes higher but is at the bottom end of the group.

6. Meta Platforms, Inc. (META) – AVOID

We continue to be impressed with the company and the stock. Right now, though, the stock is quite extended, and given its track record of volatility around earnings reports, we would avoid it for now.

7.  Apple Inc. (AAPL) – BUY

The most “boring” of the group. We think they continue to execute, and the stock moves higher, but it is in the middle of the group in terms of attractiveness.

Looking at these stocks as a group at the same time really cemented WHY these companies are so big. They have INCREDIBLE track records of performance. They grow and beat numbers, which is really incredible when you look at the scale of these firms.

Another observation is that these companies correlate to the earnings revisions. That is true of all companies, but especially for this group.

In 2022, the companies as a group saw negative revisions, and all traded lower, taking the stock market with them. Since early 2023, though, almost all of them have seen strong positive revisions and taken the stocks—and the entire market—higher with them.

Given the recent momentum, we think the positive earnings revision trend will continue. This is good for these stocks and for the market.