Marketsfab 4, magnificent seven
Jan 02, 2024 08:56 AM EST
The stocks known as the "Magnificent Seven" have been the shining stars of 2023. Taken as a whole, they have contributed about two-thirds of the S&P 500's annual return.
The true question, though, is whether the "Magnificent Seven" will continue to dominate the industry in 2024. Or may other equities take the lead in 2024?
Not the most intriguing stock out there is Visa. The firm is not in the news every day; it has been operating for decades. Its business strategy is straightforward and somewhat boring.
In the fifteen years that have elapsed since its 2008 initial public offering (IPO), the compound annual growth rate (CAGR) for Visa shares is 21%. That implies that a $10,000 investment in Visa stock during the company's IPO would today be worth more than $204,000.
A brilliant business strategy, charging fees in return for enabling payments on Visa's massive payments network, lies behind that incredible achievement. Visa handled 212 billion transactions in its fiscal year 2023, which concluded on September 30. The total amount of payments processed by Visa exceeded $12 trillion. The business made $17.3 billion in net profits and $32.7 billion in sales from that.
Additionally, the business paid $16.1 billion in dividends and repurchased shares to reward its stockholders. That is a formula that all investors ought to like, and Visa and its stockholders will continue to benefit from it in 2024.
Despite being the lowest on my list in terms of market capitalization, CrowdStrike (NASDAQ: CRWD) is a stock that all investors ought to be aware of. This is due to the fact that the business is among the top suppliers of cybersecurity solutions.
CrowdStrike offers AI-enabled security modules to safeguard the endpoints, data, and networks of its clients. The significance of this has increased due to the recent surge in cyberattacks.
Indeed, only in 2023, hackers gained access to a wide range of businesses, including casinos, stores, hospitals, and schools. Hackers have occasionally demanded ransoms in order to restore important activities or return sensitive data.
The demand for CrowdStrike's solutions is soaring due to the significant surge in cybercrime.
The firm recorded 35% sales increase for the most recent quarter, which ended on October 31. Furthermore, the subscription-based business model of CrowdStrike is appealing and expandable. Subscriptions have accounted for 94% of the company's revenue during the previous nine months. Moreover, six thirds of CrowdStrike's clientele utilize five or more of the security modules offered by the business.
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Shopify (NYSE: SHOP) is next. With one of the fastest-growing e-commerce platforms globally, the firm is positioned for significant growth in 2024.
Shopify's stock saw a decline in 2022 along with many other fast-growing companies due to the sharp increase in interest rates and the stock market collapse.
But that brief setback started a fire. The management made expense reductions in each of the previous two years, beginning with 10% and 20% workforce reductions in 2022 and 2023, respectively.
Shopify's free cash flow has increased as a result. As of the company's most recent third quarter, it is $548 million.
Yet Shopify is still expanding in spite of the expense cuts. Over the past three years, revenue growth has averaged 43%, contributing to the overall revenue rise from $2.9 billion in 2020 to $6.7 billion now.
More importantly, Shopify is quickly becoming as the preferred e-commerce platform for emerging firms and influencers. For instance, Shopify has collaborated with Blendjet, Allbirds, and Crate & Barrel to create online shops, boost conversion rates, and explode sales.
Finally, Nvidia (NASDAQ: NVDA) completes the Fab Four. Of course, Nvidia is one of the most well-known of the Magnificent Seven. This is a result of Nvidia capitalizing on an unparalleled surge in demand.
In other words, the AI revolution is transforming the nature of business. AI is assuming control. These days, businesses are racing to scale out their AI capabilities in order to stay one step ahead of the competition, or at least level with it.
As a result, there is an enormous demand for Nvidia's best AI chips. In a similar vein, Nvidia's earnings and sales are soaring above experts' wildest expectations for the upcoming year. The average estimate for Nvidia's 2025 earnings per share (EPS) increased by 23% in the previous ninety days, from $16.71 to $20.50.
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