The 'Magnificent Seven' stocks have been dominating investment headlines lately, as this exclusive mega-cap group is in a league of its own and has performed mostly well as of late. It's for a reason.
meanwhile Nvidia (NVDA 3.12%) This is without a doubt the most exciting Magnificent Seven stock to watch in 2024 so far. microsoft (MSFT -0.15%) and apple (AAPL 0.53%) As the U.S. stock market continues to compete for the top spot by market capitalization, the best performers among the Magnificent Seven will emerge over the next five to 10 years. alphabet (Google 2.15%) (GOOG 2.04%)
front and back of the alphabet
Alphabet is best known as a subsidiary of Google, and for good reason. In addition to its industry-dominant Google search business, Google also rolls out Gmail, Maps, Chrome, YouTube, and the Android mobile operating system, just to name a few. Collectively, these are referred to as Google Services Businesses. In fact, I used four different Google services in the process of writing this article. this is, tons Earn a reliable and profitable income.
Another major part of the business is Google Cloud. It is a cloud infrastructure provider that competes with Google Cloud. Amazon (AMZN 0.40%) Web services and Microsoft's Azure. It currently ranks third in market share but is growing rapidly.
Alphabet could be a big long-term winner
Alphabet makes most of its revenue from ad sales, particularly the Google services side of the business, and there may be more growth potential here than meets the eye. Thanks to evolving AI technology, Alphabet is continually improving how it can target ads more effectively, which inherently makes them more valuable. Additionally, while the growth potential for the search business is certainly limited, this is not the case for some of Alphabet's other ad-driven platforms, such as YouTube.
From a growth perspective, Google Cloud is definitely the more interesting part of the business. Google Cloud currently accounts for less than 11% of the company's total revenue, but it's also the fastest growing part of Alphabet, with revenue expected to grow 26% year over year in 2023. In fact, in 2018, Google Cloud accounted for just 11%. It accounts for more than 4% of the company's total sales.
This may just be a starting point.The size of the cloud computing market is currently estimated at $676 billion; quadruple This could be a huge growth driver if Google Cloud could simply maintain its market share, but recent data shows that Google Cloud is outperforming the market leader.
Amazing profitability and reasonable valuation
Alphabet also has approximately $111 billion in cash and short-term investments on its balance sheet, which, when combined with the more than $80 billion in annual net income it generated in its most recent quarter, provides it with significant financial flexibility. It's also worth noting that you can pursue future opportunities. They arise.
At a valuation of about 22 times expected earnings, I wouldn't exactly call Alphabet a “blue chip” company. cheap However, by this standard, it is definitely the cheapest of the Magnificent Seven. But as a market-leading, highly profitable business that's growing revenue at double-digit rates, it seems attractively valued. Alphabet is a rare company that combines a dominant core business with fast-growing secondary businesses with significant long-term growth potential. And while it's not the biggest stock in the Magnificent Seven today, I wouldn't be shocked at all if that changes in the next few years.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool's board of directors. Matt Frankel has a position at Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: His January 2026 $395 long call on Microsoft and his January 2026 $405 short call on Microsoft. The Motley Fool has a disclosure policy.
