"There are multiple ways to value a stock, but I think the most appropriate for the Magnificent Seven is the forward price-to-earnings ratio. For the most part, every company in this group is growing at a faster-than-market pace, at 10% annually, and is highly exposed to trends such as artificial intelligence (AI). As a result, investors are better off valuing a stock based on where it's going rather than where it's been."
"From this viewpoint, Meta Platforms has the lowest forward earnings ratio. (Note: Tesla was removed from this chart because it has a price-to-forward earnings ratio of 200). There are a lot of takeaways from this chart, but I think the most notable is Meta's 21.1 forward earnings price tag. For comparison, the S&P 500 has a forward earnings ratio of 21.9, indicating that Meta is cheaper than the overall market."
Meta Platforms currently trades at a discount to the S&P 500 based on forward price-to-earnings. The Magnificent Seven are the market's largest tech companies, and most rarely go on sale. Forward P/E is presented as the appropriate valuation for high-growth, AI-exposed firms growing roughly 10% annually. Meta has the lowest forward earnings ratio among the group at 21.1, versus the S&P 500's 21.9. Meta is investing heavily in AI and hardware like augmented- and virtual-reality glasses. Despite AI efforts, Meta's core business remains advertising until new products prove monetizable, posing a reality check for investors.
Read at The Motley Fool
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