Magnificent Seven PE Ratios vs Industry and S&P 500

The P/E Ratio is a baseline Fundamental analysis metric to assess how a stock is currently priced compared to its counterparts and historical prices. It can be used to answer the question: is this stock on sale?

Here are the current TTM P/E ratios for the Magnificent Seven stocks:

TickerPE (TTM)Industry PE (TTM)vs Industryvs S&P 500*Industry
AAPL28.8229.54-2.44%20.38%Technology Hardware, Storage & Peripherals
MSFT34.1654.86-37.73%42.69%Software
AMZN72.3669.074.76%202.26%Broadline Retail
NVDA108.7247.83127.31%354.14%Semiconductors & Semiconductor Equipment
META27.1226.52.34%13.28%Interactive Media & Services
GOOGL26.0526.5-1.70%8.81%Interactive Media & Services
TSLA70.8858.4821.20%196.07%Automobiles
*S&P 500 PE (TTM) 23.94

Investor Bill Ackman highlighted that Alphabet’s low P/E ratio was one of the key inputs for entering a large position in the stock earlier this year.

Alphabet (GOOGL), we bought it early this year. It had a lot to do with AI because AI was the reason the stock was cheap. ChatGPT was launched, and Google fumbled their offering. The stock sold off to 15x earnings for one of the greatest businesses in the world. Google has spent billions of dollars on AI, they bought DeepMind, they hire great Engineers, so you could presume they were in a great place with AI, but they took a much more cautious launch approach, fumbled an early demonstration, and made people think they were behind. It led to a very mispriced stock, and we bought more in the $120s. It’s our second largest investment.

Billionaire investor Bill Ackman at CNBC’s Delivering Alpha Summit — 9/28/2023

Additional context on Alphabet’s P/E ratio: In the past 5 years the ratio has ranged between 16.5 – 42, with an average of 27.