The Mag 7 Stock Charts: Which are Hot?

The 'Magnificent 7' stocks are entering earnings season with varied outlooks and valuations, challenging their perception as 'defensive plays.' Tesla, reporting first on October 22, 2025, faces scrutiny with a 270 forward P/E, a poor earnings surprise record, and an expected 32.6% earnings decline for the year. In contrast, Microsoft and Apple demonstrate strong earnings consistency but high valuations, while Alphabet shows robust 23.6% earnings growth for 2025 and a more attractive P/E of 25, and Amazon, the worst YTD performer, presents the lowest P/S ratio among the group.

Analysis

The upcoming earnings season for the Magnificent 7 stocks presents a mixed outlook, challenging their perceived "defensive" status given universally high valuations. While these trillion-dollar companies are staples of modern life, none qualify as classic value stocks, with most exhibiting elevated price-to-earnings (P/E) and price-to-sales (P/S) ratios, where a P/S over 10 is considered expensive. The overall sentiment for the group is mildly positive, yet individual company fundamentals vary significantly.

Tesla, set to report first on October 22, 2025, faces considerable headwinds, marked by the worst earnings surprise track record among the group, beating only two of the last four quarters. Its valuation remains stretched with a forward P/E of 270 and a P/S of 15, while earnings are projected to decline 32.6% this year, marking a third consecutive annual decrease. This suggests potential market anticipation of a 2026 turnaround, despite current fundamental weakness.

In contrast, Alphabet stands out with a projected 23.6% earnings jump in 2025 and a more attractive forward P/E of 25, making it the best performer year-to-date with shares up 35.5%. Microsoft and Apple demonstrate strong earnings consistency, each missing only once in the last five years, but carry high P/S ratios of 13.5 and a P/E of 32, respectively. Meta Platforms also shows robust earnings growth of 18% and 11 consecutive beats, despite a P/S of 10.1.

Amazon, the sole underperformer year-to-date with shares down 2.4%, paradoxically offers the most appealing relative valuation within the group, sporting a P/S ratio of 3.4. This positions Amazon as a potential outlier, trading at a significant discount to its peers on a sales multiple basis, despite its recent stock performance.

Key Decisions for Investors

• Investors should scrutinize individual Mag 7 earnings reports and forward guidance, focusing on specific valuation metrics rather than group averages.
• Exercise caution with Tesla due to its negative earnings trajectory, poor surprise record, and extremely high valuation, despite its YTD rebound.
• Consider Alphabet for its strong projected earnings growth and relatively more attractive P/E within the high-valuation Mag 7 cohort.
• Evaluate Amazon's current underperformance and significantly lower P/S ratio as a potential relative value opportunity compared to its highly-priced peers.