The so-called “Magnificent Seven” stocks didn't get that nickname for nothing. This refers to a group of technology companies that have historically delivered market-disrupting profits and are likely to continue to do so in the future. All of them are definitely worth some consideration, and in my opinion, most of them are part of most investors' portfolios.
However, two of the companies apple (AAPL -1.17%) and meta platform (meta -0.92%), which is very close, is my favorite. Let's take a look at why these two tech stocks are perennially great stocks.
Apple's market capitalization is approaching $3 trillion, and the iPhone, the company's biggest growth driver for the past 15 years, is losing momentum. Just to be clear, the iPhone continues to generate tens of billions of dollars in sales every year for his Apple, and remains its largest category in terms of revenue. But that doesn't drive sales growth like it once did.
Although many investors are skeptical about Apple's future, the company can still deliver market-beating returns. First, Apple has a history of creating newer and better technological devices and tweaking existing gadgets. Not all of them will be as successful as the iPhone, but investors can expect many more gems from the tech giant along these lines.
Second, Apple has become increasingly dependent on its services division. The opportunities here are almost endless. Thanks to an installed base of over 2 billion devices, Apple can offer a wide range of services, from video and audio streaming to healthcare and fintech. There's nothing stopping the company from adding new options, and that's exactly what the company has done historically.
Apple's services business generates much higher profit margins than its other businesses, so it becomes a larger portion of its revenue, which does wonders for its bottom line. Third, Apple has a strong competitive advantage derived from its brand name and switching costs, making it one of the most valuable brands in the world. Those who have joined Apple's ecosystem of interconnected devices and services find it difficult to leave for fear of having to deal with complications such as having to migrate valuable data. I feel it.
There's a reason Apple consistently ranks among the top companies in terms of customer loyalty. Last but not least, Apple pays a dividend. Over the past 10 years, dividends have increased by 120%. For those who choose to reinvest dividends, reinvesting dividends can help increase long-term returns. Apple may no longer offer the profits it did in the 2010s, but this is an incredibly high bar for any company.
Still, the tech giant should remain a leader in its sector for the long term and continue to deliver above-average returns.
Facebook's parent company, Meta Platforms, also has its critics. Economic pressures have caused advertising revenues to decline for some time, and heavy investments in the Reality Lab division have weighed on profits. But Meta Platforms turned a corner last year. The company cut costs while benefiting from a recovery in the advertising market.
Revenues were up, profits were soaring, and the stock had a very strong 2023. This will tell you about the outlook for the meta platform. Like many successful companies, it's susceptible to the vagaries of the economy, but its business is strong enough to handle them. One of Meta Platforms' most important assets is that it boasts 3.96 billion monthly active users across its websites and apps.
This equates to about half of the population visiting at least one meta website at least once a month, and about 3.14 billion people visiting it daily. Additionally, the company also benefits from competitive advantages primarily due to network effects. Want to catch up or share photos with friends and family? A great option is to go to a website that already has a lot of users, like Instagram. And the more people that join a platform, the more attractive it becomes.
Meta is also ramping up new monetization efforts. The company's Reels (short-form videos across Facebook and Instagram designed to compete with TikTok) are soaring in popularity, and paid messaging on WhatsApp is also delivering excellent results. The company is also focusing on the field of artificial intelligence.
Additionally, while Meta Platforms has not abandoned the Metaverse idea, it is unlikely to see a significant return on investment any time soon. Still, this could represent a long-term opportunity for the company. E-commerce is another obvious growth opportunity for Meta Platforms given its large ecosystem. Meta should soon be back in the trillion-dollar club, but that doesn't mean the end of the company's growth journey.
There are still many chapters left in that story. Investors can buy stocks, sit back and enjoy the fun.
Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool's board of directors. Prosper Junior Bakiny is in charge of the meta position on his platform. The Motley Fool has positions in and recommends Apple and Meta Platforms. The Motley Fool has a disclosure policy.