The magnificent seven – Apple, Nvidia, Microsoft, Alphabet, Amazon, Meta, and Tesla – have a combined market capitalisation of $17.75 billion, equating to 60% of the US GDP. These mega-corporations dominate stock indices, making up 33% of the S&P 500 and 44.5% of the Nasdaq 100.
The earnings reports of these stocks are therefore highly impactful, with Nvidia’s results rivalling the US consumer price index (CPI) and employment data according to the European Central Bank’s latest stability report. Next week, five of the seven will release their earnings: Tesla, Microsoft, and Meta on 29 January, and Apple and Amazon on 30 January.
Extended hours on the magnificent seven
A quick note: Earnings are released after the cash session closes, starting at 9pm (UK time), which can cause significant market volatility outside regular trading hours.
From 27 January 2025, you’ll be able to trade on the magnificent seven from 9am until 9pm (UK time). This means that you’ll be able to participate in the pre-market session, before the core trading hours of the NYSE and Nasdaq, which run from 2.30pm until 9pm (UK time).
Order types and execution will function as normal during extended hours, although trading volumes will be lower compared to the main trading session. Account liquidations will also function as normal.
High valuations due to higher growth
The magnificent seven have a high capitalisation-weighted price/earnings (P/E) ratio of 41x nearly double the S&P 500's 21x P/E ratio when excluding these companies. This reflects market expectations of faster growth from these tech giants.
According to consensus estimates from investing.com, the magnificent seven are expected to see market-cap-weighted earnings grow by 28%, and sales by 21.7%, in Q4 2024, far outpacing the S&P 500's projected earnings growth of 12.5% and sales growth of 4.7% (according to FactSet).
The Nasdaq 100 is hovering near its annual and historical highs, between 20,500 and 20,761, with trading volume stabilising at low levels. The trend remains bullish, favouring an upside breakout unless the index’s price reverses below last week's low of 19,929.
Valuation vs expectations
Among the magnificent seven, Alphabet and Meta have lower valuation multiples but higher expected earnings and sales growth. In contrast, Apple and Tesla have higher multiples and slower growth rates. Amazon and Microsoft sit near the group average for growth and valuation. Nvidia, the world's largest company by market capitalisation (nearing $3.5 billion), has high valuation and growth multiples. Its results, set for release on 26 February, will provide more insight.
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