Can the Magnificent 7 Continue to Lead the Market in Q3?

Source: InvestingPro

• Year-to-date performance: +37%

Apple's quarterly results published on August 3 were disappointing overall, with the AAPL share price falling by 5.5% the day after publication. Revenues just in line with expectations were met with a negative reaction despite EPS coming in 5.5% above consensus.

Source: InvestingPro

For the next quarter, to be released on October 26, the analyst consensus is for EPS of $1.39, 10.3% higher than in Q2, on revenues of $89.3 billion, up 9.1% quarter-on-quarter.

Source: InvestingPro

Finally, with regard to analysts' forecasts, the average target of the 42 analysts who follow Apple shares is $199.97, 12.2% higher than the current price.

Source: InvestingPro

By contrast, AAPL's InvestingPro Fair Value of only $162.08 implies a downside risk of 9%.

Meta Platforms/h2

• Year-to-date performance: +153%

Meta Platforms posted convincing quarterly earnings in Q2, with earnings per share beating expectations by 3.2%, while revenue exceeded consensus by 3.1%. As a result, META shares jumped 5.85% the day after publication, according to InvestingPro data.

Source: InvestingPro

For the current quarter, for which financial results are due on November 1, analysts are expecting an average EPS of $3.59, which would represent an increase of over 20.4% on the previous quarter. Meta's revenues are forecast at $33.37 billion, up 4.2% in Q2.

Source: InvestingPro

The 50 analysts who follow the stock have an average target of $362.25, i.e., 22.9% above the current share price.

Source: InvestingPro

Meta's InvestingPro Fair Value, which is an average of 13 recognized financial models, stands at $354.19, which translates into a bullish potential of 16%.

Alphabet/h2

• Year-to-date performance: +47%

Alphabet's quarterly earnings also beat expectations in Q2, driving the share price up by 6.37% in the session following publication. EPS came in at $1.44, 7.3% above expectations, on revenue of $74.6 billion, beating forecasts by 2.5%.

Source: InvestingPro

For the next earnings, scheduled for October 24, analysts are forecasting a decline in EPS to $1.42, on revenue up very slightly to $75.57 billion.

Source: InvestingPro

As for the outlook for Alphabet shares, analysts see fairly limited upside potential, with an average target of $150, translating into an upside potential of 15.7%.

Source: InvestingPro

InvestingPro Fair Value, which averages 13 recognized valuation models, is slightly more optimistic, at $151.61, or 16.9% above the current price.

Amazon/h2

• Year-to-date performance: +64%

Online retail giant and global cloud services leader Amazon was the stock in the Magnificent 7 that posted the biggest earnings miss. Indeed, the EPS of $0.65 reported on August 3 was almost 90% higher than analysts had expected.

Revenue of $134.4 billion exceeded forecasts by 2.3%, leading to an 8.86% rise in the share price the day after the figures were revealed.

Source: InvestingPro

For the next quarter, although analysts are forecasting a further increase in revenue, profitability is set to decline, with EPS expected at $0.56.

Source: InvestingPro

From an analyst's point of view, Amazon's share price has an upside potential of 23.3%.

Source: InvestingPro

By contrast, valuation models are more conservative, with InvestingPro's Fair Value of $153.97 implying a more limited upside potential of 11.7%.

Nvidia/h2

• Year-to-date performance: +191%

Nvidia has witnessed the most impressive surge since the year's commencement. This surge can be attributed to its widely acknowledged position as the stock with the highest exposure to the AI revolution.

In its latest quarterly results announced on May 24, Nvidia outperformed consensus expectations by a significant margin. The earnings per share (EPS) exceeded predictions by a remarkable 18.8%, and revenue surpassed consensus estimates by over 10%.

Source: InvestingPro

And the trend is set to continue according to analysts' forecasts, since EPS for the second quarter, which will not be published until August 23, is expected to come in at $2.07, almost double the previous quarter's figure, for revenues up 52.7% quarter-on-quarter.

Source: InvestingPro

However, beyond these optimistic earnings forecasts, analysts also have a relatively conservative 12-month target for the stock. Indeed, their average target of $490 for Nvidia reflects a limited upside potential of 15.1%.

Source: InvestingPro

Above all, Nvidia's InvestingPro Fair Value, which is based on recognized financial models, is limited to $307.54, i.e. 27.7% below the last closing price.

Tesla/h2

• Year-to-date performance: +96%

Despite earnings beating consensus by 11.1% and revenue confirming expectations overall, Tesla's share price fell by more than 10% following the publication of its Q2 results, mainly due to unclear forecasts.

Source: InvestingPro

Analysts are forecasting a decline in earnings for the next quarter, while EPS is expected to come in at $0.81, compared with $0.91 in Q2. Revenues are expected to remain stable.

Source: InvestingPro

In terms of the outlook, the average target of $272.5 set by analysts following the stock implies a potential upside of 12.5%.

Source: InvestingPro

TSLA's InvestingPro Fair Value of $253.12, on the other hand, reflects a smaller potential gain of 4.5%.

Microsoft/h2

• Year-to-date performance: +34%

Although coldly received, with the stock falling 2.13% in reaction to the release, Microsoft's Q2 quarterly results exceeded expectations in terms of both EPS and revenue.

Source: InvestingPro

On the other hand, it should be noted that both revenues and earnings per share were expected to decline in the previous quarter.

Source: InvestingPro

Analysts remain fairly optimistic about Microsoft stock, however, with an average target of $400, which assumes the stock will rise by more than 24%.

Source: InvestingPro

InvestingPro's Fair Value, which is an average of the main financial models most commonly used, is much more cautious, however, at $332.65, representing an upside potential of just 3.2%.

Conclusion/h2

Provided Nvidia doesn't unveil a nasty surprise when it reports earnings later this month, it's safe to say that, despite a few disappointments in the details, the Magnificent 7 delivered on its promise in Q2.

However, as shown by InvestingPro's assessment, which considers most of these stocks to be correctly valued (except Nvidia, already considered overvalued), and as shown by the mixed forecasts for next quarter's results, further upside from current prices becomes more uncertain.

While investors will continue to keep a close eye on these Magnificent 7 for a correction that would enable them to buy at a better price, they would also do well to look at other stocks outside these main headliners.

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Disclaimer: This article is for information purposes only; it is not intended to encourage the purchase of assets in any way, and does not constitute a solicitation, offer, recommendation, opinion, advice or investment recommendation. We remind you that all assets are considered from different angles and are extremely risky, so that the investment decision and the associated risk are specific to the investor.