Tech stocks including Nvidia and Tesla have dropped, market downturn, some undervalued opportunities.
From Morningstar: 2024-08-07 06:34:00
The “Magnificent Seven” tech stocks led by Nvidia and Tesla have seen a significant selloff, with the Morningstar US Market Index dropping 6.3% since August. The decline was fueled by high valuations and market concentration. However, lower prices have led to more attractive valuations, with Microsoft and Amazon now trading in undervalued territory.
The market has experienced a significant downturn since July 16, with the Magnificent Seven contributing nearly half of the decline. Nvidia and Amazon were the largest detractors, falling over 14% each. The selloff has been concentrated in semiconductor-related names, contrasting with recent trends where semis outperformed.
Second-quarter earnings for the Magnificent Seven have largely been positive, with a focus on artificial intelligence. Most companies reported solid earnings, with Microsoft, Alphabet, and Amazon exceeding expectations. Tesla disappointed with missed consensus. The companies are emphasizing continued spending on AI, raising investor questions on the return on these investments.
Of the stocks that have reported earnings, five saw their fair value estimates raised, with Microsoft and Amazon now considered undervalued. With Microsoft trading at a 19% discount to its fair value estimate and Amazon at a 17% discount, they are currently considered buys. other undervalued tech stocks mentioned include Adobe, Palo Alto Networks, NXP Semiconductors, and CrowdStrike.
Morningstar analysts have raised fair value estimates for several of the Magnificent Seven stocks. Alphabet’s fair value estimate was increased to $182, Amazon’s to $195, Apple’s to $185, and Meta’s to $450. Microsoft’s fair value estimate was raised to $490 due to accelerating Azure growth. While most stocks have seen their fair value estimates increase, Apple is considered overvalued.
Read more at Morningstar: Magnificent Seven Stocks Slide, Valuations Looking…