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RIP, Magnificent 7

Nearly everything that made the Magnificent 7 magnificent has disappeared.

Luke Kawa

I have lived through FANG, BAT, GRANOLAS, FAAMG, and enough others to know that the age of the Magnificent 7 is over.

Whatever we’re going through in markets — whether it’s a repair from healthy correction or a dead-cat bounce before the start of something worse — I’m fairly confident that coming out the other side of this, we won’t be talking about Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, and Tesla as some kind of collective. 

Nvidia’s blockbuster earnings report in May 2023 didn’t just mark the unofficial kickoff for the AI stock market boom. Judging by references in news articles, this was also the time “Magnificent 7” began to live rent-free in investors’ heads.

Now, nearly everything that made the Magnificent 7 “magnificent” is fading. There were three components that underpinned the decision to group these stocks together:

  1. They’re all megacap tech-adjacent stocks.

  2. They were (mostly) growing earnings far faster than the S&P 500, and this was expected to continue.

  3. They consistently outperformed the benchmark US stock index.

Well, No. 1 is still true, so there’s that.

But on the bottom line, there’s not across-the-board magnificence to speak of. For Tesla, there never was. Perhaps, to hearken back to the movie that bears the same name as this group of stocks, it’s the Josh Faraday of the bunch.

The premium earnings per share growth from most of these companies relative to the S&P 500 in 2024 is leading to some convergence in 2025, at best, and outright below-market earnings growth for others.

And the price performance that used to speak for itself now speaks volumes — in the other direction. On average, this is both the deepest decline for the cohort since it became popular as well as its largest underperformance versus the S&P 500.

Now only one member of the cohort — Meta — is outperforming the S&P 500 over the past three months, tying the lowest number since the end of May 2023.

The good news: there’s an infinite number of options to replace “Magnificent 7” in the market lexicon going forward.

Colleagues more creative than myself (like David Crowther, among many others) can now get to work dreaming up the next acronym that defines stock market dominance.

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SpaceX gets a wave of bullish ratings from Wall Street analysts

SpaceX received more than a dozen positive analyst calls on Tuesday — including from major Wall Street banks — as they initiate coverage on Elon Musk’s space and AI company.

SpaceX went public on June 12 at a $2.2 trillion valuation, the largest debut in history. While the company hasn’t yet posted a profit, it seems to have convinced Wall Street that it will get there and grow its valuation on the way.

Of the at least 17 analysts that gave a rating on Tuesday, all but one gave it a “buy” or “outperform” rating. MoffettNathanson was "neutral."

The ratings come as SpaceX joined the Nasdaq 100 index, a benchmark tech-heavy basket of companies that underpins millions of portfolios. The inclusion adds built-in demand for the stock from index funds and ETFs.

Still, SpaceX fell more than 5% on Tuesday amid a broader sell-off, and is currently effectively flat from its opening price of $150 a share.

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Nike sinks to lowest level since 2014 after warning of “challenged” sales environment in Q4 report

Did Nike do it?

Investors had a mixed reaction after the global sports apparel company reported its fourth quarter earnings on Tuesday after the bell. Shares initially rose 5% as Nike beat out Wall Street expectations amid a hefty tariff refund bonus. However, the stock then sank to its lowest level since August 2014 in postmarket trading.

Here are the Q4 numbers:

  • Revenue of $11.0 billion (estimate: $10.8 billion).

  • Adjusted earnings per share of $0.20 (estimate: $0.12).

Ahead of this report, Nike warned that results would be flattered by a one-time tariff refund (now estimated at roughly $0.52 per share for the bottom line). That gave the company an extra cushion in snapping its streak of seven quarters of year-over-year profit declines.

Over the past year, the company had been punished by tariffs on imported goods, stagnant consumer spending, and increasing competition from other footwear brands like New Balance, Adidas, and Hoka.

Outgoing CFO Matthew Friend deemed it an “increasingly challenging operating environment, where sell-through remains challenged.”

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