My top stock “Magnificent Seven” just proved again why it’s the best buy of the group

The “Magnificent Seven” has been a dominant group in the market in recent years. It consists of:

1. Microsoft (NASDAQ: MSFT)

2. Apple (NASDAQ: AAPL)

3. Nvidia (NASDAQ: NVDA)

4. Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL)

5. Amazon (NASDAQ: AMZN)

6. Metaplatforms (NASDAQ: META)

7. Tesla (NASDAQ: TSLA)

My top Magnificent Seven stocks to buy just reported their latest results, and they were excellent. However, the market has not rewarded the stock and it is lower like the rest of the group. Is this a buying opportunity for one of the best stocks on Wall Street? I think so.

Alphabet’s turnover is growing steadily

My favorite stock in the Magnificent Seven right now is Alphabet. Over the past year, Alphabet has achieved some excellent results and is starting to perfect its product offering in the field of artificial intelligence (AI). Moreover, the advertising segment (which accounts for about three-quarters of all revenues) is doing well due to the maturity of the business. segment. In the second quarter, revenue rose 11% year over year to $64.6 billion. W

While some investors may worry that this growth isn’t nearly as fast as it needs to be for Alphabet to stand out, I don’t see it that way. Alphabet’s advertising segment is a reliable business that creates huge cash flows for the company, allowing it to invest in next-generation technology such as AI. It also funds the growth of another essential segment: Google Cloud.

Google Cloud is the smallest of the big three cloud computing players. This size disadvantage can be traced back to Google’s late entry into this market, but it is still growing rapidly. In the second quarter, revenue grew 29% year over year to $10.3 billion. It also posted an operating margin of 11%, which is still far behind what market leader Amazon Web Services (AWS) achieved in the first quarter with a margin of 38%. Once Google Cloud achieves scale and improves operating margins to similar levels, this segment will deliver meaningful earnings growth, although that will take several years.

Overall, Alphabet’s quarter was solid, with revenue growing 14% year over year and earnings per share (EPS) rising from $1.44 to $1.89. It was hard to find fault with the quarter, but it was also hard to find a ‘wow’ moment.

The stock fell 5% the day after trading, dragging the rest of the market down with it. But I think this pullback is a mistake and offers investors an opportunity to get into the stock now that the price is down about 10% from its peak.

Unlike its peers, the share does not have an expensive premium

For the most part, Magnificent Seven shares are incredibly pricey compared to the broader market. However, Alphabet does not have the same premium, so investors do not run as much risk by investing in Alphabet. After the pullback, Alphabet shares trade at 23 times forward earnings.

The story continues

Although this takes the valuation back to just a few months ago, the price is close to the broader price S&P500 index, which trades at 22.7 times forward earnings. When you buy Alphabet stock at these levels, you are essentially buying an above-average company at a market average price. That’s a great deal, and investors should take advantage of it.

Alphabet’s consistent revenue growth, growing dividend, and aggressive stock buyback programs (Alphabet bought back more than $15 billion worth of stock in the second quarter) make this a bull’s-eye for a company that can grow profits faster than 10% annualized to grow. That’s a fantastic investment proposition, and it’s one that investors need to understand.

You don’t have to hit a home run every time you invest. Sometimes the best investments are the stable growers that can outperform the market by a few percentage points every year. and I think Alphabet falls into this category.

Should you invest €1,000 in Alphabet now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Keithen Drury has positions in Alphabet, Amazon, Meta Platforms and Tesla. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has one disclosure policy.

My top stock “Magnificent Seven” just proved again why it’s the best buy of the group was originally published by The Motley Fool