After
turbocharging
late
2023’s
stock
market
rally,
some
of
the
”
Magnificent
7
”
technology
darlings
are
looking
less
magnificent
this
year.
In
2023,
Nvidia
was
the
clear
leader
of
the
group
of
seven
market
drivers,
soaring
239%
alone.
The
maker
of
critically
important
artificial
intelligence
processors
was
followed
in
performance
by
Meta
,
Tesla
and
Amazon
,
which
respectively
rose
194%,
102%
and
81%.
Even
the
stocks
that
lagged
inside
the
group
of
seven
still
beat
the
S
&
P
500
‘s
24%
gain
by
at
least
twice
as
much
last
year.
Shares
of
Microsoft
,
Alphabet
and
Apple
—
the
three
weakest-performing
members
of
the
group
—
added
57%,
58%
and
48%,
respectively.
But
investor
expectations
for
a
broadening
market
rally
involving
a
greater
number
of
stocks
this
year
have
been
bolstered
by
the
diverging
performance
of
the
Magnificent
7
so
far
in
2024.
Of
the
seven
names
in
the
group,
two
are
now
trading
lower
in
early
2024
—
Apple
and
Tesla
—
one
of
them
by
a
lot.
Shares
of
Meta
and
Nvidia
are
leading
the
Magnificent
7
for
the
year,
with
both
stocks
jumping
roughly
34%
each.
On
the
other
hand,
Tesla
finished
Friday’s
session
24.4%
lower
on
the
year,
while
Apple
has
fallen
3.5%.
This
pessimism
regarding
Tesla
and
Apple
has
extended
beyond
their
year-to-date
stock
performance.
Compared
to
the
rest
of
the
group,
analysts
are
less
bullish
on
the
two
names,
with
just
29%
of
analysts
covering
Tesla
rating
it
a
buy,
while
about
46%
of
analysts
have
given
Apple
the
same
rating.
The
rest
of
the
Magnificent
7
stocks,
however,
have
received
anywhere
from
70%
to
85%
buy
rating
consensus.
Meanwhile,
analysts
are
also
expecting
much
slower
earnings
growth
this
year
from
the
two
laggards.
While
the
other
five
are
forecast
to
see
at
least
double-digit
earnings
growth
estimates,
analysts
predict
Apple’s
earnings
growth
to
stay
relatively
unchanged.
On
the
other
hand,
consensus
estimates
call
for
Tesla
earnings
to
fall
by
20%.
Brewing
concerns
According
to
Wall
Street
analysts,
this
downward
trend
for
Apple
and
Tesla
points
to
fractures
beneath
the
surface
at
both
companies.
While
last
year’s
rally
could
be
attributed
to
all
tech-adjacent
stocks
receiving
a
blanket
artificial
intelligence-induced
boost,
investors
are
finally
subjecting
individual
stocks
to
more
scrutiny,
said
Art
Hogan,
chief
market
strategist
at
B.
Riley
Wealth
Management.
Hogan
believes
that
Tesla
and
Apple
may
be
suffering
because
they
haven’t
yet
determined
how
to
make
money
from
artificial
intelligence.
“It’s
hard
to
put
your
finger
on
how
Tesla
benefits
necessarily
from
artificial
intelligence,
writ
large,
at
least
in
the
near
term,”
he
told
CNBC.
“Not
surprisingly,
Apple
falls
into
that
category
as
well,
as
they
haven’t
really
announced
an
AI
strategy.”
Baird
listed
Tesla
as
a
“bearish
fresh
pick”
earlier
in
the
week,
citing
a
Delaware
court
ruling
against
CEO
Elon
Musk’s
pay
package
as
a
catalyst
for
the
negative
sentiment.
Analyst
Ben
Kallo
also
noted
that
disruptions
to
Red
Sea
shipping
routes
could
affect
Tesla
deliveries
in
2024.
Meanwhile,
infrastructure-related
headwinds
within
the
electric
vehicle
space
are
also
hurting
Tesla
stock,
Hogan
said.
The
strategist
added
that
Tesla
is
also
suffering
from
the
lack
of
a
low-end
model
to
compete
with
BYD
in
China.
Similarly,
investors
sent
shares
of
Apple
lower
by
3.4%
last
week
after
the
company
reported
a
13%
sales
decline
in
China
,
despite
beating
fiscal
first-quarter
expectations
for
both
earnings
and
revenue.
Earlier
this
month,
Barclays
analyst
Tim
Long
downgraded
Apple
to
underweight
from
equal
weight,
citing
weaker
demand
and
“lackluster”
sales
of
the
iPhone
15,
especially
in
China.
Likewise,
Piper
Sandler
analyst
Harsh
Kumar
blamed
peak
growth
rates
and
valuation
concerns
as
two
reasons
for
downgrading
Apple
to
neutral
from
overweight.
Also
playing
into
the
bearish
sentiment
on
Apple
and
Tesla
is
that
technology
stocks
have
simply
been
held
to
a
higher
standard,
according
to
Charles
Schwab
investment
strategist
Kevin
Gordon.
“Tech
is
the
only
sector
that’s
seen
more
positive
revisions
of
all
the
sectors
lately.
The
bar
has
been
lowered
for
all
other
sectors
but
raised
for
tech,”
Gordon
told
CNBC.
Blips
on
the
radar
On
the
other
hand,
Ed
Yardeni,
president
and
chief
investment
strategist
at
Yardeni
Research,
isn’t
particularly
worried
about
the
outlook
for
Apple
or
Tesla.
He
believes
that
any
short-term
fluctuations
in
sentiment
won’t
ultimately
matter
in
the
long
run.
“I
think
it’s
unrealistic
to
expect
that
[the
Magnificent
7
stocks]
are
all
going
to
perform
in
the
same
fashion
on
a
regular
basis,”
he
said
to
CNBC.
“From
time
to
time,
they’re
going
to
diverge
for
a
while.”
However,
Yardeni
pointed
out
that
the
seven
technology
titans
all
have
strong
cash
flows,
are
less
debt-dependent
than
other
companies,
are
managed
by
innovative
leaders
and
have
the
technological
prowess
to
maintain
high
profit
margins.
“You
never
want
to
bet
against
these
companies
because
they
have
a
tremendous
amount
of
experience
creating
growth,”
Yardeni
added.
“My
sense
is
that
they’ll
continue
to
account
for
at
least
a
quarter
of
the
market
for
the
foreseeable
future
and
have
high
valuations
…
The
only
real
problem
with
the
Magnificent
7
is
they’re
expensive.”
Catchup
trade
As
the
market
broadens
out
to
include
more
stocks
in
2024,
Hogan
sees
investing
opportunities
for
sectors
that
underperformed
last
year,
such
as
financials,
healthcare
and
energy,
to
catch
up
with
the
major
market
averages.
Likewise,
Gordon
predicts
that
financial
names
could
have
a
moment
in
the
spotlight
this
year.
“That’s
an
area
that
has
a
lot
of
catch-up
to
do
to
the
broader
index
but
also
stands
to
benefit
if
you
have
seen
a
peak
in
yields
for
the
cycle,”
Gordon
said.
Similarly,
falling
interest
rates
—
alongside
a
waning
dollar
—
also
make
the
case
for
a
comeback
from
small-cap
stocks
in
2024,
according
to
Hogan.
“The
gap
between
the
Russell
2000
and
the
S
&
P
500
is
the
largest
we’ve
seen
going
all
the
way
back
to
2000,”
he
said.
“Mean
reversion
alone
would
dictate
the
credible
possibility
for
small
caps
to
start
finally
getting
some
sponsorship.”
—
CNBC’s
Fred
Imbert
contributed
to
this
report.
