The Magnificent 7 Stocks Are a Pre-Earnings Buy (Despite the Tesla Miss!)

Stocks to buy

One down. Six to go. Tesla (NASDAQ:TSLA) kicked off third-quarter earnings season for the so-called Magnificent 7 of the Nasdaq last week with a thud. Elon Musk’s electric car juggernaut reported results that underwhelmed Wall Street, sending its stock down nearly 10%. Investors are now getting ready for other top tech titans to reveal Q3 numbers this week and they are hoping for some better results.

First up, Microsoft (NASDAQ:MSFT) and Google owner Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) report Tuesday after the closing bell. Facebook parent Meta Platforms (NASDAQ:META) is on tap to release results Wednesday. Amazon (NASDAQ:AMZN) closes out the busy week of tech earnings on Thursday. The remaining two of the Magnificent 7 stocks — Apple (NASDAQ:AAPL) and Nvidia (NASDAQ:NVDA) — are due to report earnings on Nov. 2 and Nov. 21, respectively.

There’s a lot at play. All seven stocks have surged so far this year, but they’ve cooled a bit lately due to concerns about rising bond yields and continued inflation fears. The spike in oil prices due to the Israel-Hamas war isn’t helping.

But it would be a mistake to write off the top techs because of macroeconomic concerns. What’s more, Tesla’s weak performance shouldn’t have much (if any) bearing on the rest of tech since none of the other Nasdaq leaders really compete with Tesla. (Amazon, which has a stake in electric truck company Rivian, and Alphabet, which owns autonomous car company Waymo, come closest).

So, the rest of the tech giants may be compelling buys, especially given recent market volatility.

Magnificent 7 Stocks: What to Expect This Earnings Season

In fact, the remaining half-dozen companies in the Magnificent 7 are poised to report solid results. Consider that Americans still seem willing to spend on affordable luxuries… such as streaming media. Netflix’s (NASDAQ:NFLX) blockbuster earnings report last week (on the same day that Tesla disappointed) showed that consumers are still spending on monthly plans to watch their favorite shows and movies. That should bode well for Amazon (which owns Prime Video), YouTube parent Alphabet and Apple, the home to Ted Lasso and other buzzworthy programs.

Amazon also stands to win big during the upcoming holiday shopping season. U.S. consumers don’t seem to be pulling back at all. The September retail sales figures were surprisingly strong. And according to research from FactSet, Amazon’s earnings per share in the third quarter are expected to more than double from a year ago. Microsoft could get a boost from the resilient consumer too thanks to its Xbox gaming console. And Apple could benefit from iPhone 15 sales.

Then there’s the artificial intelligence boom. Meta’s investments in AI have helped lead to more relevant ads, particularly on the company’s Instagram and Reels platforms. That should boost Meta’s revenue. And Nvidia, a big player in AI chips, is anticipated to report extremely strong numbers for the third quarter. Its earnings per share are forecast to surge nearly 475% from a year ago. FactSet says that Nvidia’s earnings are expected to be the biggest contributor to profit growth for the entire S&P 500 in the third quarter.

So, there’s good reason to expect that Microsoft, Alphabet, Meta, Amazon, Apple and Nvidia will avoid the fate of Tesla. Better-than-expected numbers could also lead to big rallies like Netflix had. (Shares surged 16% following its earnings report). Of course, the risk is that even a slight earnings or revenue miss or a whiff of cautious commentary from top executives at any of these companies could hurt their stocks.

How to Profit Without Buying Tech Stocks

That’s why investors who don’t want to pick and choose winners and losers among the Magnificent 7 and want broader exposure to all Big Tech should consider funds instead. The MicroSectors FANG+ ETN (NYSEARCA:FNGS) has big stakes in all the Magnificent 7 stocks, as well as Netflix, Broadcom (NASDAQ:AVGO) and Snowflake (NYSE:SNOW). There’s also the Invesco S&P 500 Top 50 ETF (NYSEARCA:XLG). That fund owns all the mega-caps of the S&P 500. So, in addition to tech, investors also get a bit more diversification. Warren Buffett’s Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B), insurer UnitedHealth (NYSE:UNH) and Big Pharma leader Eli Lilly (NYSE:LLY) round out the top 10.

As of this writing, Paul R. La Monica did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Paul R. La Monica is a veteran financial journalist with nearly 30 years experience (including more than 20 at CNN) covering the stock market and other asset classes, the economy and other corporate and business news.

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