Look Outside the ‘Mag 7’ to the ‘Terrific 3’

There’s been plenty of discussion around the so-called “Magnificent 7” in the media. That’s for good reason. Pick your mega-cap tech stock with AI capabilities, and that stock has likely soared. Over the past two decades at least, that’s been the trade.

The thing is, in recent weeks, we’ve started to see a rotation build within the market. Traders and investors appear to be positioning for a continued move out of mega-cap tech stocks and into companies with more favorable valuations. Say what you will about recession risks and other factors that may play into this decision, but it’s clearly a trend at this point.

With this trend in mind, I thought I’d dive into three tech stocks that don’t fall into the conventional ‘Mag 7’ bucket, but are three companies I’d consider as standalone bets for growth investors looking for relative value right now.

Key Points About This Article:

• The rally in the Magnificent 7 group of mega-cap tech stocks has been impressive, but the momentum in these names appears to be waning.
• For those looking outside these names, here are three top options to consider right now.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Shopify (SHOP)

Shopify logo on a wall

The e-commerce sector is one that really isn’t getting any love or attention right now. Shopify (NYSE:SHOP | SHOP Price Prediction), an e-commerce platform provider allowing small and medium-sized businesses to set up online shops (large outfits as well, but that’s still not the primary business), has fallen out of the limelight for good reason.

The pandemic really shed a spotlight on the long-term growth potential of e-commerce companies relative to their bricks and mortar counterparts. Yes, the pandemic was a passing phase and we’re pretty much back to normal in most regards. However, it’s also true that companies that don’t have an online presence likely aren’t going to capture nearly the market share they think they can, whether they ultimately sell their goods online or not.

Shopify’s service is thus becoming more of a necessity for millions of businesses around the world. And with expansion plans growing in new markets, and Shopify’s footprint and market share continuing to grow, there’s a lot to like about this e-commerce giant’s ability to continue to see valuation expansion, particularly in a lower interest rate environment. With strong double-digit growth and a reasonable earnings multiple relative to its peers, this is a top growth stock I think is worth considering right now.

MercadoLibre (MELI)

Latin American woman sipping a drink with friends

Another stock investors should pay more attention to is MercadoLibre (NASDAQ:MELI). As the leader in e-commerce in Latin America, the company is thriving despite market fragmentation. The company dominates 68% of Argentina’s e-commerce but only 14% in Mexico, and is a top fintech player in Brazil and Mexico.

While often compared to Amazon (NASDAQ:AMZN), the company’s offerings are impressive. MercadoLibre operates an online mall for third-party merchants, facilitates auctions like eBay, enables brands to manage their own stores like Shopify, and supports payments similar to PayPal. Its primary markets are Brazil, Argentina, and Mexico, with ongoing expansion efforts. The company’s Q1 2024 results were impressive, with revenue surging 30% and increase in total payments reached 85%. This shows continuous growth trends for investors in MELI stock, and this is growth I think can continue long-term.

With a strong market position and plenty of room for international growth, MELI stock remains a top overlooked tech name investors may want to pay attention to for the long-term.

Compass (COMP)

A photo of a compass with the hand pointing towards the word ‘integrity’

Offering unique real estate technology with end-to-end platform client management, Compass, Inc. (NYSE:COMP) rounds out this list. The company’s revenue primarily comes from agent commissions on property transactions through its platform. Its platforms is also AI-powered, with impressive solutions in streamlining workflow, machine learning, and manage customer relationships.

In its Q1 2024 report, the company increased its principal agent count by 7%. Revenue reached $1.05 billion and Compass saw an impressive 7.1% increase in transactions. Currently, 29 hedge funds hold COMP with more than $188 million invested in this fintech giant. For Q2 2024, Compass raised its forecast to $1.7 billion revenue, surpassing analyst estimates. Moreover, Compass also cut its operating expense forecast by $211 million, aiming for more cost-saving efforts.

Additionally, a recent price target hike to $5 per share was issued by Barclays for COMP stock. Analysts maintain and “equal weight” rating for the stock, but I think these ratings and estimates are more likely to increase than decrease over time.