Wall Street Loves This Magnificent 7 Stock, but My Data Doesn’t
An early favorite has emerged as Wall Street’s pick for “stock of the year,” and it’s not exactly a shocker.
It’s part of the “Magnificent 7” that everyone talks about.
It’s valued at $1.6 trillion.
And chances are pretty good you own it, if not directly than quite possibly through mutual funds.
In early 2024 trading, five analysts already named Amazon.com (AMZN) as a top pick, according to CNBC.
Of 55 analysts with a rating on AMZN, only one is “hold.” The other 54 are “strong buy” or “buy.”
I just don’t see it.
Or, more precisely, my data doesn’t see it.
And since my Quantum Edge system wins about 70% of the time and has outperformed the broader market by 7-to-1 over three decades of data, I’m more confident in my data than prognostications.
Let’s look at what it shows… and which Magnificent 7 stock rates the highest right now.
AMZN’s Not-So-Hot Quant Ratings
There’s no doubt AMZN had a great 2023. There were some sharp swings, but an 80% gain is impressive by any measure.
Zoom out to the last two years, however, and the picture looks quite different. Shares are down about 10%.
Analysts are bullish on Amazon’s web services group (AWS), as well as the impact of artificial intelligence and the prospects for more advertising spending in the new year.
They could be right. (They are educated opinions after all.) But they’re still opinions on what could or should happen this year.
As Edwards Deming said, “Without data, you’re just another person with an opinion.”
In Amazon’s case, my cold hard data – which has a better track record than opinions – disagrees with Wall Street. Amazon’s Quantum Score, the overall rating my system assigns to a stock, is 56.9 out of 100. That’s well below the optimal buy zone of 70 to 85.
Source: TradeSmith Finance and MAPsignals.com
My system further assigns fundamental and technical scores to more than 6,000 stocks each day, and Amazon fails to impress in both of those areas as well.
Its Technical Score of 64.7 isn’t bad, but technicals are a measure of price action, and you would expect a decent reading after 2023’s big run. I could live with that score in a new buy if the fundamentals were superior, but that’s not the case here.
Amazon’s Fundamental Score of 45.8 is discouraging. Sales and earnings growth are okay to good over the last one and three years, but the company’s negative profit margin (-0.5%) is a concern. So is debt, which stands at 106.1% of equity.
And after the recent run, this is now an expensive stock, even with those red flags. AMZN trades at 53.9 times expected earnings, and both the price/book value ratio (5.9) and price/tangible book ratio (7.2) are also on the lofty side.
Also of note, Amazon has not appeared on my system’s Top 20 list since July 2020. That’s a list my research firm provides to hedge funds and institutions of the week’s 20 strongest stocks seeing unusual institutional accumulation.
None of this means AMZN is headed for a terrible year. But it does mean the probability of significant upside is lower than some other stocks.
The Most Magnificent of the Magnificent 7
If you feel compelled to own a Magnificent 7 stock, the highest rated in my system is Alphabet (GOOGL). With a Quantum Score of 72.4, it currently sits in my targeted buy zone.
Source: TradeSmith Finance and MAPsignals.com
The fundamentals and technicals also both rate well. And unlike AMZN, GOOGL appeared on the Top 20 list seven times in 2023 alone.
GOOGL rates as a buy right now, but keep in mind that it is already massive with a $1.7 trillion market cap. Stocks that rate equal to or better than GOOGL that aren’t so huge likely offer more profit potential.
In fact, we just added one such stock in the new TradeSmith Investment Report issue. It also has a Quantum Score of 72.4, but its fundamentals are more muscular at 79.2.
This company is a leader in an innovative process that’s helping push the processing power of semiconductors past the physical limits of transistors. All of the new technologies need higher-performance chips, and this company is helping to make that possible as a key supplier to a massive and growing industry boosted even further by government initiatives.
You can learn more about how to access my latest recommendation here.
We’ll see a year from now how right Wall Street’s opinion was on AMZN. Analysts do get some calls right, but they also get an awful lot wrong. That’s why I’m sticking with the data.
Talk soon,
Jason Bodner
Editor, Jason Bodner’s Power Trends
Disclosure: On the date of publication, Jason Bodner held a position in Alphabet (GOOGL), mentioned in this article.
P.S. Big Money loves the company I just recommended because of its stellar growth, successful business model, and its enviable position in the epicenter of a new growth revolution in semiconductors.
Its superior fundamentals, technicals, and established history of Big Money support set it up for big profits over the long term.
You can still be among the first to learn all about this company as a member of TradeSmith Investment Report. Click here for details.