Are the Magnificent 7 Stocks Diverging in 2024? Nvidia Endorsed by Analysts Despite Apple Target Price Declines

Moomoo News Global joined discussion · Jan 8 05:21

After leading the market surge last year, the highly sought-after Magnificent 7 suffered a comprehensive defeat at the beginning of 2024 after rate-cut bets diminished. It is worth noting that the stock prices of these major tech companies also showed significant divergence. Among them, $Apple(AAPL.US)$ suffered the most severe pressure in the first week, falling 5.9%; while $Meta Platforms(META.US)$ and $NVIDIA(NVDA.US)$demonstrated relative resilience, dropping only 0.57% and 0.86%, respectively.

According to Joshua Mahony at Scope Markets:"We could see some profit-taking come into play before long; Questions remain over the likeliness of the 150-basis points worth of rate cuts expected by the markets currently, and thus there is a risk that the Federal Reserve members will seek to reign in those expectations somewhat".

Source: moomoo

Apple's Stock Price Falls to Near Two-Month Low After Two Downgrade Ratings in First Week of New Year

Among the Magnificent Seven giants, $Apple(AAPL.US)$ was consecutively downgraded by Barclays and Piper Sandler in the first week of 2024, causing the stock to drop to a nearly two-month low of 181.18 under significant bearish pressure, a retreat of over 9% from its mid-December high.

Specifically, Barclays downgraded Apple's stock to "underweight" and adjusted its price target from $161 to $160; Piper Sandler downgraded its rating on Apple's stock from "overweight" to "neutral" and lowered its price target to $205.

Two investment banks have expressed concerns over the weak demand for the iPhone, which contributes to nearly half of Apple's total revenue. On one hand, a weaker macroeconomic environment, inflation, and high interest rates have put pressure on consumers, which may further impact sales of Apple products. On the other hand, competition from Chinese rival Huawei may also pose challenges to Apple's demand in China. According to moomoo data, Apple's market share in the smartphone sector has declined for four consecutive quarters since Q4 2022.

Source: moomoo

In addition, Barclays analyst Tim Long is not optimistic about Apple's service revenue, predicting that the growth rate will be around 10% and 8% for the fiscal years 2024 and 2025, respectively, far below the previous expectation of around 20%. Harsh Kumar of Piper Sandler also suggests that Apple may face headwinds due to ongoing patent disputes related to new Apple Watch models and a strengthening US dollar.

“We are still picking up weakness on iPhone volumes and mix, as well as a lack of bounce-back in Macs, iPads and wearables,” said analyst Tim Long.

"We are concerned about handset inventories entering into 1H24 and also feel that growth rates have peaked for unit sales," Piper Sandler lead analyst Harsh Kumar wrote.

Moomoo data shows that in the past three months, analysts have lowered their target prices for Apple. As of the latest update, 32 analysts have an average target price of $201.59 for Apple, which represents a potential increase of about 11% from the current price.

Source: moomoo

Despite Losing Global EV Sales Crown to BYD in Q4 2023, Tesla's New Growth Areas Deserve Attention

Sharing Apple's woes, $Tesla(TSLA.US)$also faced analysts' pessimistic attitude and challenges to its core business at the beginning of 2024. The highly-watched Q4 2023 production and delivery data showed that Tesla achieved its annual delivery target of 1.8 million vehicles, with a total of 1.8086 million delivered in 2023. However, it's worth noting that Tesla's Q4 delivery of 484,500 vehicles, which exceeded expectations, still fell short of its Chinese rival BYD, which sold 526,400 pure electric vehicles in the same period. This means that the global best-selling pure electric vehicle title once belonged to Tesla has been taken over by BYD. Meanwhile, more analysts are cautious about Tesla, mainly due to the slowdown in demand for electric vehicles and the possibility that some of Tesla's models may no longer qualify for government subsidies in the US and Europe. Craig Irwin, an analyst at Roth Capital who has been bearish on Tesla in the long run, even reiterated his target price of $85 for Tesla at the beginning of the year.

Nevertheless, as Tesla CEO Elon Musk pointed out, the growth potential of Tesla's other businesses such as AI/robotics is worth noting. Those who are bullish on Tesla are focusing on the next generation of vehicles, autonomous driving technology, and humanoid robot Optimus.

Are the Magnificent 7 Stocks Diverging in 2024? Nvidia Endorsed by Analysts Despite Apple Target Price Declines

Cathie Wood's Ark Invest, gave a target price of up to $2,000 for Tesla by 2027, going against the market sentiment while resuming its purchase of Tesla stocks after selling them for three consecutive quarters. On December 20, 2023, and January 3, 2024, it bought a total of about 216,000 shares of Tesla.

Nvidia Receives Further Support from BofA Analysts Due to Strong Free Cash Flow

Despite a pullback earlier this year, $NVIDIA(NVDA.US)$ still received support from some analysts. According to Bank of America analysts, generative AI is still in its early stages, and Nvidia has a strong competitive position and a solid lead in the field of artificial intelligence. The upcoming new AI chips are expected to support Nvidia's further development.

The bank expects Nvidia's rapid revenue and profit growth to generate $100 billion in free cash flow over the next two years, with most of it likely to be used for new growth plans, which could lay the foundation for its growth prospects.

Source: IOT ANALYTICS

Vivek Arya of Bank of America believes that Nvidia's ability to establish recurring revenue streams is key to maintaining high growth and high valuation. Compared to other peers such as the Magnificent 7, Nvidia's PE and other valuation metrics are still discounted. He pointed out that although Nvidia's free cash flow profit margin is twice that of the other six, and its compound annual growth rate in sales is three times that of the other six peers, its P/E ratio and enterprise value-to-free cash flow ratio still have a discount of 20% to 30%. The institution is optimistic that Nvidia's significant stock price increase in 2023 may continue into 2024.

Nvidia's average target price has risen in the past three months：

Source: moomoo

Earnings Season is Approaching, Paying Attention to Tech Giants' Profit Realization

According to analysts, the Magnificent 7 face their first test this year with the 21-day moving average as a technical indicator. These tech giants are under pressure due to overly optimistic bets on interest rate cuts and profit-taking behavior that cannot be ignored. In order to regain market confidence, they may need to deliver satisfactory answers to the upcoming earnings season, demonstrating their ability to sustain profitability and match the market's target price, in addition to their strong technological capabilities.

Below are the average target prices and upside potential of the seven giants as analyzed by analysts: