3 key data points tell us how hot six of our Big Tech stocks are in this market
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The Magnificent Seven stocks on Monday, led by Nvidia’s jump to all-time highs, were enjoying a rebound after a rough first week of 2024. Nvidia and the five others we own — Alphabet, Amazon, Apple, Meta Platforms, and Microsoft — were all big winners last year. While pleased to see our stocks go higher, we think last week’s caution remains warranted, considering the parabolic gains many of them made into year-end. As Jim Cramer discussed in his weekly column , the moves, spurred by the belief in a Federal Reserve pivot to lower interest rates in the near future, were not sustainable. That’s why we trimmed all of them first thing on Jan. 2. We’re still cautious on the Jim-anointed Magnificent Seven (the only one we don’t own is Tesla ) but wanted to dig in a bit more into the six we own to better quantify their moves and get a sense of how hot the stocks may be at the moment. To do this, we looked at how shares of these companies performed since their prior intraday lows in late October and how their forward price-to-earnings (P/E) multiples have changed over that same stretch. (It’s worth noting that both stock price action and Wall Street estimate revisions play into the change in valuation.) GOOGL 1Y mountain Alphabet 1 year Alphabet bottomed recently at $120.21 on Oct. 27, 2023 and subsequently rallied to a high of $142.68 (up 18.7%) on Dec. 26. Shares of the Google parent now trade around $137 (down 4% from the high but still up 14% from that prior low). Over that time, Alphabet’s forward P/E/ has expanded from 18.8 times to 20.5 times. That’s still a bit below the five-year historic average of 23.4 times. AMZN 1Y mountain Amazon 1 year Amazon stock most recently troughed at $118.35 on Oct. 26 and then rallied to a high of $155.63 (up 31.5%) on Dec. 20. It now trades at around $148 (down 4.9% from the high but still up 25.1% from that prior low). Since that low, Amazon’s forward P/E has expanded from 38.2 times to 39.9 times. That’s still cheap based on the five-year historic average of 63 times. AAPL 1Y mountain Apple 1 year Apple hit a recent low of $165.67 on Oct. 26. Since then, the stock rallied to a high of $199.62 (up 20.5%) on Dec. 14. It now trades at around $183 (down 8.3% from the high but still up 10.5% from that prior low). Since the Oct. 26 low, Apple’s forward P/E has expanded from 25.4 times to 27.3 times. That’s higher than the five-year historic average of 24.2 times. META 1Y mountain Meta Platforms 1 year Meta Platforms stock put in a recent low at $279.40 on Oct. 26 and then rallied to a high of $361.90 (up 29.5%) on Dec. 28. The Facebook and Instagram parent now trades at around $355 (down 1.9% from the high but still up 27.1% from that prior low). Over that stretch, Meta’s forward P/E has expanded from 17.1 times to 19.9 times – just a bit lower than the five-year historic average of 21.1 times. MSFT 1Y mountain Microsoft 1 year Microsoft stock bottomed a bit before the others, finding a recent low at $309.45 on Sept. 26, 2023. It then rallied to a high of $384.30 (up 24.2%) on Nov. 29 It now trades at around $370 (down 3.7% from the high but still up 19.6% from that prior low). Since the September low, Microsoft’s forward P/E has expanded from 27.4 times to 30.5 times. That’s only a little bit higher than the five-year historic average of 28.3 times. NVDA 1Y mountain Nvidia 1 year Nvidia , which hit a new all-time high Monday, bottomed out at $392.30 on Oct. 31. That move since then represented a gain of 31.5%. Since its recent low, Nvidia’s forward P/E has actually contracted from 26.4 times to 25.3 times, putting it well below the five-year historic average of 39.4 times. (In a separate commentary Monday, we took a closer look at how Nvidia can still be so undervalued even at record highs.) As we can see, of the six names, only Apple and Microsoft currently trade at a level above their five-year average valuation. That said, we can’t say the other four names are necessarily undervalued given that current interest rates are much higher than what we’ve seen over the past five years. That means that some compression may be warranted. But, if rates truly have peaked and a soft landing for the economy is indeed playing out, it stands to reason some re-expansion of multiples may be on the horizon in those names trading below their five-year averages. Or that at the very least, there is no cause for concern that we’re looking at anything more than your run-of-the-mill pullback as profit takers step in and buyers hold off following a year of stellar gains. Put simply, this isn’t the market setup in which you should feel you need to get money to work. Don’t let the fear of missing out get the better of you — especially as earnings season is about to heat up. Concern yourself more with the question: Are your cash levels are adequate? To reiterate Jim’s Sunday night conclusion, if you haven’t raised a hearty amount of cash in recent weeks, then you are out of sync with us. (Jim Cramer’s Charitable Trust is long GOOGL, AMZN, APPL, META, MSFT, NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. 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Sebastien Bozon | AFP | Getty Images
The Magnificent Seven stocks on Monday, led by Nvidia’s jump to all-time highs, were enjoying a rebound after a rough first week of 2024.
Nvidia and the five others we own — Alphabet, Amazon, Apple, Meta Platforms, and Microsoft — were all big winners last year.
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