Stocks to buy

3 Stocks That Could Outperform the Magnificent 7 Stocks in 2024

The Magnificent Seven stocks are the new FAANG. Unsurprisingly, many members of the FAANG cohort are a part of the Magnificent Seven. The large tech companies that comprise this group have consistently paced and outperformed the market. Investors would have been very happy to start positions in any of the Magnificent Seven stocks ten years ago.

While the Magnificent Seven stocks offer a vision of possibilities for long-term investors, new stocks are emerging. Some equities have outperformed the Magnificent Seven stocks without much fanfare. But, that can change within a few years. 

Therefore, investors looking for high-potential stocks may want to consider these three growth stocks.

Cloudflare (NET)

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Cloudflare (NYSE:NET) and the other stocks on this list have 1-year and 5-year returns that would make most of the Magnificent Seven stocks jealous. Additionally, NET offers content delivery network services and keeps websites safe from cyberattacks. 

Switching out of any content delivery network or cybersecurity service takes considerable time. Furthermore, if the results are good, business owners will just stick with the platform. Cloudflare has done a great job at retaining customers and attracting new ones. That dynamic helped the company achieve 32% year-over-year (YOY) revenue growth and narrow its net losses.

The stock has gained 83% over the past year and is up by 333% over the past five years. A switch to profitability and continued revenue growth can send the stock much higher in the long run. It’s normal for high-potential companies to not be profitable right away. It took Amazon (NASDAQ:AMZN) almost a decade to become profitable. 

Cloudflare has accelerated its efforts into artificial intelligence and has entered into several partnerships. AI can fuel more revenue growth for the company and help its stock outperform the Magnificent Seven.

Arista Networks (ANET)

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Arista Networks (NYSE:ANET) is a cloud networking company with a long history of beating the market. Further, shares have gained 131% over the past year and are up by 353% over the past five years. The firm has a 34-forward P/E ratio.

Corporations use Arista Networks to keep their sensitive data safe and become more efficient. ANET has over 8,000 cloud customers worldwide including large corporations like Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META). 

These companies should stick around for many years since their products need solutions from companies like Arista Networks to function smoothly. Investment management firm Giverny Capital mentioned that the computing power for an AI chat query is “roughly seven times more than for a Google or Bing search.”

Arista Networks has continued to delight investors with its earnings reports. The company reported 28.3% YOY revenue growth in the third quarter. Net income went up by 54.1% YOY. Those growth rates and the tremendous AI runway can help Arista Networks reward long-term investors.

ServiceNow (NOW)

Source: Sundry Photography / Shutterstock.com

ServiceNow (NYSE:NOW) is riding the wave of a 74% 1-year gain and a 290% increase over the past five years. In fact, investors are excited about the stock and have bid it up to a $153 billion market cap.

ServiceNow offers cloud computing technology that helps organizations run more efficiently and manage data. The company has over 7,700 customers. Additionally, 49 of those customers have annual contract values above $20 million. Also, NOW has nearly 1,800 customers with annual contract values exceeding $1 million. 

Most of the company’s customers remain, which means high revenue and earnings growth. ServiceNow reported 25% YOY revenue growth in the third quarter and more than tripled its net income during the same period. 

Finally, net profit margins have been expanding nicely and reached double-digits in Q3. Thus, ServiceNow has outperformed most of the Magnificent Seven stocks and looks poised to continue that trend in 2024 and beyond.

On this date of publication, Marc Guberti held long positions in NET, ANET, and NOW. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

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