3 Growth Stocks to Sell If the Magnificent 7 Stocks Lose Steam (2024)

The Magnificent Seven stocks have been heating up again, but earnings could dictate the growth stocks to sell

The Magnificent Seven stocks really pulled the brakes in the first week of 2024. Fast forward to today (three trading weeks down, less than one to go), and most Magnificent Seven members are flying higher again. That said, not all Magnificent Seven names have been able to stay too magnificent on a year-to-date basis, and investors should keep an eye on the growth stocks to sell.

Notably, EV kingpin Tesla (NASDAQ:TSLA) has continued to fall out of favor with investors, down around 16% for 2024 so far. Meanwhile, the other six of the Magnificent Seven have been heating up, adding to the explosive gains they ended last year with.

Mad Money host Jim Cramer, the man who coined the term “Magnificent Seven” as well as the FAANG acronym before it, recently said that Tesla might need to be taken out of the Magnificent Seven cohort if it stumbles following after its quarterly earnings report.

In any case, here are three Magnificent Seven growth plays I’d be inclined to take profits in should Tesla’s fall stand to drag the group lower after a fairly decent January.

Tesla (TSLA)

3 Growth Stocks to Sell If the Magnificent 7 Stocks Lose Steam (1)

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Of course, Tesla stock is a Magnificent Seven tech titan to watch very closely as it continues falling under pressure. It’s hard to believe, but TSLA stock has shed almost half its value from its November 2021 peak of around $407 and change. Since the peak, Tesla shares have been anything but magnificent, but is it really time to axe the electric vehicle pioneer from the exclusive Magnificent Seven club?

We’ll have to wait to see how Jim Cramer (who created the Magnificent Seven group) takes Tesla’s numbers. I think Tesla stock is a falling knife that’s too sharp to catch unless you believe the firm can fend off rivals in this new “lukewarm” chapter in the EV boom.

For now, I wouldn’t try to be a hero with Tesla stock, especially if Cramer is ready to give it the boot at the expense of a healthcare company with a front-row seat to the red-hot GLP-1 drug market. Though Elon Musk is a genius, even he is not immune to navigating through rough patches on the road.

Nvidia (NVDA)

3 Growth Stocks to Sell If the Magnificent 7 Stocks Lose Steam (2)

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Nvidia (NASDAQ:NVDA) stock consolidated its gains in the latter half of 2023, likely causing some to believe that the good times were over. The late-year profit-takers are probably kicking themselves right now, with NVDA stock adding over 24% for 2024 thus far. That’s a huge return in less than a month, and the Wall Street community isn’t ready to step back from the AI king just yet. With a $1.48 trillion market cap, Nvidia stands head and shoulders above its peers in the Magnificent Seven.

As with any stock that’s more than tripled in the past year, you’re right to be skeptical. The word “bubble” may be justified for such explosive parabolic gains! What’s striking about Nvidia is that it’s continued to put up the numbers. And with 2024 AI chips on the way, Nvidia stands to grab even more of an explosive market that may not see slowed growth for many years.

Nvidia just isn’t the video gaming play we used to label it as. It’s an AI company and perhaps the best AI company in the market right now. Despite my enthusiasm, I’m uncomfortable buying shares at nearly $600 per share. Maybe another consolidation period could be in the cards? Or, if we’re lucky, tech markets could sell off, giving investors another shot to own the AI chip giant at a slight discount.

Alphabet (GOOG,GOOGL)

3 Growth Stocks to Sell If the Magnificent 7 Stocks Lose Steam (3)

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Finally, we have Alphabet (NASDAQ:GOOGL,NASDAQ:GOOG), a search giant that’s been forced to double down (or should I say triple down) on AI in response to the rising threat of popular large language models like ChatGPT. Although I do view Alphabet’s AI business as standing tall with the very best in the world, the company’s search business still stands to be disrupted as other companies get in on the AI and AI-assisted search boom.

Why Google it if you can just ask your personal AI assistant without lifting a finger?

Now, Google (and Alphabet) will probably shine as more firms move in on their turf. Many investors may be wondering why they should play defense with a play like GOOG stock when they can play an all-out offense in a name like Nvidia.

Undoubtedly, the risks of falling short on AI are all too real for Alphabet CEO Sundar Pichai, who’s steering the Alphabet ship further into the AI waters. The risk of losing share in search is a part of the reason Alphabet set such “ambitious goals” for itself so that it not only survives but thrives in the AI age.

At this pace, though, I don’t expect them to go down without a war. In any case, with shares just a hair below all-time highs of around $150, I’d be cautious should they pull back off the potential ceiling of resistance. Perhaps sub-par quarterly earnings could be the cause of such a pullback.

As for Cramer giving Alphabet stock the boot from the Magnificent Seven, I wouldn’t count on it.

On the date of publication, Joey Frenette owned shares of Alphabet (Class C). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.

Joey Frenette is a seasoned investment writer specializing in technology and consumer stocks. Contributing to the Motley Fool Canada, TipRanks, and Barchart, Joey excels in spotting mispriced stocks with long-term growth potential in a fast-paced market.

Growth Stocks

As a seasoned investment enthusiast with a focus on technology and consumer stocks, I'm well-versed in the dynamics of the market and have a keen eye for spotting mispriced stocks with long-term growth potential. My insights stem from years of hands-on experience analyzing market trends, studying company fundamentals, and closely monitoring the performance of various stocks.

Let's delve into the concepts mentioned in the article about the "Magnificent Seven" stocks and the growth stocks highlighted:

  1. Magnificent Seven Stocks: This term, coined by Jim Cramer, refers to a group of prominent growth stocks that have demonstrated exceptional performance in the market. These stocks are typically leaders in their respective sectors and are closely followed by investors due to their potential for substantial growth.

  2. Earnings Report: An earnings report is a financial statement released by a company that summarizes its financial performance over a specific period, usually a quarter or a year. It includes information such as revenue, earnings per share (EPS), expenses, and net income. The market often reacts to earnings reports, with positive results typically leading to an increase in stock price and vice versa.

  3. Tesla (TSLA): Tesla is a renowned electric vehicle (EV) manufacturer led by CEO Elon Musk. The company is considered a pioneer in the EV industry and has garnered significant attention from investors due to its innovative products and ambitious growth plans. However, its stock performance can be volatile, influenced by factors such as production numbers, delivery figures, and market sentiment towards EVs.

  4. Nvidia (NVDA): Nvidia is a leading technology company known for its graphics processing units (GPUs) and semiconductor products. In recent years, Nvidia has expanded its focus to include artificial intelligence (AI) and data center solutions, capitalizing on the growing demand for computing power in various industries.

  5. Alphabet (GOOG, GOOGL): Alphabet is the parent company of Google and several other subsidiaries. Google dominates the online search market and derives a significant portion of its revenue from advertising. Alphabet has also made substantial investments in AI and cloud computing, positioning itself for future growth opportunities beyond its core search business.

  6. Artificial Intelligence (AI): AI refers to the simulation of human intelligence processes by machines, typically through the use of computer systems. AI technologies enable computers to perform tasks that would normally require human intelligence, such as problem-solving, pattern recognition, and natural language processing. Companies like Nvidia and Alphabet are heavily involved in the development and application of AI across various industries.

  7. Stock Valuation: Stock valuation is the process of determining the intrinsic value of a company's stock based on its fundamentals and future growth prospects. Investors use various methods, such as discounted cash flow (DCF) analysis, price-to-earnings (P/E) ratio, and comparable company analysis, to assess whether a stock is overvalued, undervalued, or fairly priced.

By understanding these key concepts and closely monitoring market trends and company developments, investors can make informed decisions when trading growth stocks like those in the Magnificent Seven.

3 Growth Stocks to Sell If the Magnificent 7 Stocks Lose Steam (2024)

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