1 “Magnificent 7” Stock I’d Buy Over Nvidia Right Now

Here’s why Meta Platforms stock is a better choice for Canadian investors compared to Nvidia in November 2024.

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The Magnificent 7 companies that consist of giants such as Apple, Nvidia (NASDAQ:NVDA), Microsoft, Amazon, Meta Platforms (NASDAQ:META), Alphabet, and Tesla have driven the broader markets to multiple record highs in 2024. While Nvidia continues to lead the charge with gains of 181% in 2024 and over 200% last year, another Magnificent 7 stock is positioned to beat the chip maker in the next 12 months.

Valued at US$3.3 trillion by market cap, Nvidia is the second-largest publicly listed company globally. It develops artificial intelligence (AI) chips that power data centers used to train and deploy generative AI platforms such as ChatGPT. Solid demand from giants such as Microsoft, Meta, and Alphabet has allowed Nvidia to increase its sales to US$96.3 billion in the last 12 months, up from US$10.9 billion in fiscal 2020 (which ended in January).

Moreover, in the last four quarters, Nvidia reported a free cash flow of US$46.78 billion, indicating a margin of almost 50%. Nvidia currently has a market share of over 80% in the AI chip segment and enjoys pricing power in addition to a first-mover advantage. While Nvidia remains a top investment choice today, this Magnificent 7 stock should help you beat the mega-cap chip maker moving forward.

The bull case for the Magnificent 7 stock

Last week, Meta announced its third-quarter (Q3) results. It reported revenue of US$40.59 billion with adjusted earnings of US$6.03 per share, compared to estimates of US$40.29 billion and US$5.25, respectively. The social media giant saw a 19% increase in sales while net income grew by 35% year over year. Notably, it was Meta’s slowest net income growth since Q2 of 2023.

Meta Platforms owns and operates several social media businesses such as Facebook, Instagram, and WhatsApp. In the September quarter, Meta reported 3.29 billion daily active people, below estimates of 3.31 billion.

Despite its massive size, Meta continues to invest heavily in capital expenditures. In 2024, it forecasts capital expenditures between US$38 billion and US$40 billion and expects them to grow significantly in 2025 due to higher infrastructure expenses.

Meta is allocating huge sums of capital to gain traction in the rapidly expanding AI market. The company claims that more than a million advertisers have already used its generative AI advertising tools to better target consumers.

In Q3, its ad sales rose 18.7% to US$39.9 billion, accounting for 98.3% of total revenue. It projects Q4 sales to range between US$45 billion and US$48 billion, compared to estimates of US$46.3 billion.

While its Reality Labs unit posted an operating loss of $4.4 billion in Q3, it grew sales by 29% to $270 million.

Is META stock still undervalued?

Meta Platforms stock has returned over 400% to shareholders in the last two years, valuing the company at a market cap of US$1.43 trillion.

A key reason for Meta’s stellar performance is its solid free cash flow expansion. In the last 12 months, it reported a free cash flow of US$52 billion, up from US$19 billion in 2022.

Priced at 25.6 times forward earnings, Meta Platforms stock is reasonably valued and trades at a 15% discount to consensus price target estimates.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.

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