For much of 2023, there was no media outlet that didn’t mention the so-called “Magnificent Seven” stocks. Although the group as a whole lost some of its luster in the first half of 2024, they remain among the stocks to watch in the stock market today due to their sheer market capitalization.
Let’s find out: In five years, these two stocks will be worth more than Apple.
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The “Magnificent Seven” stocks — Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Meta (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA) — are still dominating financial news today after leading the S&P 500 in 2023. These stocks make up roughly half of the Nasdaq index, which is dominated by high-market-cap tech companies.
You can easily buy shares of the Magnificent Seven in one go by investing in funds such as Vanguard Growth EFT or Mega Cap Growth EFT, which are heavy on large U.S. stocks. But if you’re looking to profit from owning a share of one of the seven and are trying to decide whether to invest in a company like Alphabet Inc. (Google’s parent company) or Meta Platforms Inc. (owner of Facebook and Instagram), there are a few things that may influence your decision.
Should I invest in Alphabet or Meta?
As The Motley Fool points out, tech giants Meta Platforms (NASDAQ: META) and Alphabet (NASDAQ: GOOGL) are pretty similar: They both dominate their respective industries by building great products, both started paying dividends for the first time this year, and both are making a ton of money by generating massive amounts of revenue through digital advertising.
When analyzing two companies of this size, it is often difficult to decide between them. If you believe in the potential of the Metaverse and are willing to take risks to get a bigger return, Meta may be the better choice. If you prefer a more diversified company with stable revenue from various sources, Alphabet may be a more stable investment.
But while both companies have huge growth potential and are poised to continue changing the world as we know it from a technology perspective, there are differences in the finer details, and assessing the direction each company is likely to take in the future will often determine where you invest your hard-earned money.
Alphabet, which has deals in internet search engines, cloud infrastructure, entertainment, media, advertising, consumer electronics and mobile operating systems, has two main sources of revenue: YouTube and Google, the global leaders in internet search and online video content discovery, respectively.
The company’s net worth, or market capitalization, is now $2.175 trillion, up about 40% year over year, according to Stock Analysis. TipRanks also ranks Google stock as a “strong buy,” beating earnings per share (EPS) and revenue estimates 100% over the past year. Of the 38 analysts rating the stock, only five rate it a “hold” (and none rate it a “sell”).
Randi Zuckerberg, former Facebook market development director and spokesperson and Mark Zuckerberg’s sister, said in an article for The Motley Fool that she feels her brother’s company is in a better position than Alphabet to dominate the upcoming cutting edge of AI.
Meta Platform, which provides social media apps like Facebook, Instagram, WhatsApp, etc. to the world, derives its revenues primarily from advertising, the metaverse, consumer electronics, and social media. Meta is not as valuable as Alphabet, but it is still very cash-rich.
Currently, the company is ranked as the 7th largest company in the world with a market capitalization of $1.26 trillion. On April 24, Meta beat analysts’ expectations by $0.39 in earnings per share ($4.71 to $4.32), according to Investors.com, and company executives said that while current quarter sales forecasts came in below expectations, Meta’s stock is still a good, but maybe not a great buy. Morningstar believes it should sell for $400 per share (Alphabet’s stock is currently around $176) instead of hovering around its current price of $432.
Zuckerberg correctly said Meta is well-positioned going forward, and Mark is bullish on investing in AI. Meta’s users are primarily on Facebook, where the company reported 2.11 billion daily users and 3.07 billion monthly active users in December. “Very few companies of any kind can boast such a large user base,” TipRanks said.
But with more users comes competition, and as more people, especially younger, more influential people, spend more time on apps like TikTok, it could come at the expense of time spent on Facebook and Instagram. Meta will always be competing for users’ time and advertising dollars.
Additionally, strict regulatory restrictions and changing rules on how user data can be used could alienate audiences. Google’s plan to phase out cookies for 100% of Chrome users by Q3 2024 is already underway, which will mean major changes to advertising strategies for companies that use cookies, including major Meta platforms.
Meanwhile, Alphabet’s non-internet search AI subsidiaries have already received positive reviews beyond the disastrous Gemini launch. The company’s Waymo autonomous car fleet already has self-driving cars on the streets of San Francisco. Alphabet has also developed large language models (LLMs) that show promise for widespread application to “thousands of small and medium-sized businesses,” according to Needham & Company’s Laura Martin. “Generative AI requires a constant influx of millions of data points every day to keep the LLMs up to date, but Google, thanks to search and YouTube, ingests more data than its competitors,” Martin explained.
If you’re a hedge bettor, both companies’ AI investments and election-year ad spending will likely surge barring a major downturn, making both solid bets. But looking ahead, Alphabet is the better buy: It’s cheaper, has healthier consensus upside, and has better filtered all the information about the AI ​​revolution than many of its Magnificent Seven rivals, including Meta.
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This article originally appeared on GOBankingRates.com: Meta Stock vs. Alphabet Stock: Which is the Better Investment?
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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