Just 1 of the 2 "Magnificent Seven" Stocks Trading Lower This Year Should Bounce Back

Amazon and Apple are significantly underperforming the 'Magnificent Seven' in 2025, with both stocks trading lower while the broader group surged nearly 19%. Amazon, despite modest overall sales growth, is demonstrating robust profitability, driven by its high-margin AWS cloud business which grew 18%, leading to a 33% surge in net income that exceeded analyst forecasts. In contrast, Apple is projected to record its fifth consecutive year without double-digit sales growth, with its services segment failing to deliver anticipated bottom-line improvements, making its 30x forward earnings valuation less compelling.

Analysis

Amazon and Apple are significantly underperforming the "Magnificent Seven" in 2025, with their stocks down 1.7% and 0.4% respectively, contrasting sharply with the group's overall 18.7% surge. This divergence signals a critical re-evaluation of these tech giants within the high-growth cohort.

Amazon, despite modest overall net sales growth (9-12% for three years), demonstrated robust profitability in its latest quarter, with net income soaring 33% and exceeding analyst expectations. This bottom-line expansion is largely driven by its high-margin Amazon Web Services (AWS) cloud business, which grew 18%. Trading below 30 times next year's profit target, Amazon presents a potential value opportunity if its earnings momentum continues.

Conversely, Apple faces significant growth challenges, projected to record its fifth consecutive year without double-digit sales growth, with analysts forecasting only 7% YOY revenue growth for its fiscal Q4. Its services segment has failed to deliver anticipated material growth or bottom-line improvements, evidenced by flat earnings from continuing operations over the past three years.

With Apple trading at over 30 times forward earnings amidst persistent single-digit growth and a lack of clear catalysts, its valuation appears stretched. Amazon's improving profitability and strong AWS performance suggest a more compelling investment case among the "Magnificent Seven" laggards, particularly if it sustains recent earnings beats.

Key Decisions for Investors

• Investors should closely monitor Amazon's upcoming quarterly results for continued profitability growth and AWS segment strength, as its current valuation appears more attractive given its recent performance.
• Consider re-evaluating Apple's position in portfolios, given its prolonged period of single-digit sales growth, flat earnings from services, and a valuation exceeding 30 times forward earnings without clear growth catalysts.
• Acknowledge the increasing divergence within the "Magnificent Seven" and adjust portfolio allocations to reflect individual company fundamentals rather than treating the group as a monolithic entity.