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Magnificent Seven stocks aren't too expensive - JPMorgan

Published 03/11/2024, 06:35 AM
Updated 03/11/2024, 06:38 AM
© Reuters.  Magnificent Seven stocks aren't too expensive - JPMorgan
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JPMorgan strategists said in a Monday note that the Magnificent Seven stocks are now cheaper compared to the broader equity market than they were five years ago, citing their most recent earnings data.

“The magnificent 7 are again this year driving the disproportionate share of returns, with a clear concern over how sustainable this is, but we note that this group of stocks is not trading increasingly more expensive, at least not in relative terms,” strategists wrote.

“In fact, Mag-7 stocks appear cheaper at present vs the rest of the market than they were trading on average in the past 5 years,” they added.

When viewed in absolute terms, there seems to be an excess, noted strategists, and the Magnificent Seven could also experience earnings shortfalls, suggesting they may be more susceptible to economic cycles.

Looking at the broader market, the growth investment style continues to outperform value, mainly due to its superior earnings performance.

Excluding the Magnificent Seven, S&P 500 earnings have shown a decline in recent quarters “and we believe there are risks to the consensus view that argues for the re-acceleration in earnings this year,” analysts said.

Moreover, JPMorgan voiced concerns over the high valuation of cyclical stocks, particularly highlighting sectors like autos, retail, and travel and leisure, due to potentially weaker consumer trends and the reversal of the previously strong pricing environment.

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