Prediction: These 3 stocks will not be magnificent buys in 5 years

The “Magnificent Seven” are a group of the world’s most popular and promising growth stocks. Investing in these big-name tech stocks has been a great way to earn some significant returns over the past few years. But things can change quickly in the tech world, and just because some stocks have done well in recent years doesn’t mean they’ll be solid stocks to hang onto for the long term.

There are three Magnificent Seven stocks that I don’t think will look so magnificent in five years Alphabet (GOOG 0.33%) (GOOGL 0.31%), Meta platforms (META 0.30%)and adze (TSLA -0.29%). Here’s why these specials may struggle in the years to come.

1. The alphabet

Alphabet was a stock I was bullish on. The business looked dominant with a top video streaming site (YouTube) and a top search engine (Google).

These days, I’m not as optimistic. As ads get longer and longer on YouTube, the risk is that they give users an incentive to switch to a streaming service like Netflix instead, where there’s a wide range of premium content to choose from to help justify its price tag without annoying ads (depending on subscription level).

But the biggest risk for Alphabet arguably comes in its search business. Regulators have already ruled that Google is a monopoly, and the consequences of that are still unknown, but will likely hurt its growth prospects. And with more AI-powered chatbots answering questions and reducing the need to go to Google, that’s another headwind for its sales growth.

The stock might seem cheap, trading at just 23 times its trailing earnings, and its earnings are still strong, rising 14% year-over-year in the last reported quarter, but investors shouldn’t discount the risks on long term facing Alphabet. . There could be new challenges and daunting competition that could stunt its growth and reduce its earning power, which is why I’d avoid the stock right now.

2. Meta Platforms

Another business that is doing well now but could struggle in the future is Meta Platforms. Business has been booming for the company, with revenue up 22% year over year in the June quarter to $39.1 billion. Meta management says its AI assistant will be “the most used AI assistant in the world by the end of the year.”

The present looks solid, but the future may not be as promising. Like Alphabet, Meta faces challenges from regulators. Concerns about the company’s social media platforms and their alleged negative mental health effects on users could lead to changes in Meta’s operations that could affect its bottom line. Last year, 42 state attorneys general sued Meta, claiming Facebook and Instagram were too addictive for young children. Elsewhere, it calls for greater restrictions on what data Meta collects and how it collects it. The social media platforms they operate could become less valuable to advertisers if the restrictions are added.

Then there’s Meta’s continued massive spending on its Reality Labs segment, and a metaverse that shows little sign of ever delivering the ROI needed to justify it.

At 27 times earnings, Meta stock doesn’t look overpriced, but that could change if its growth slows while expenses remain high. This is a tech stock I would avoid — it could go down a lot over the next few years.

3. Tesla

The most expensive stock on this list (based on valuation) is Tesla; investors pay more than 60 times earnings to buy shares in it. But this is not unusual for the electric vehicle (EV) maker. Investors are used to paying high multiples for stocks. However, this year hasn’t been great — the stock is down about 7%.

Investors are worried about the company’s declining margins due to increased competition and weak consumer demand. Neither of these problems are likely to improve any time soon. A potential recession could hurt demand in the short term, and while that could be temporary, increasing competition from Chinese electric vehicle manufacturers could force Tesla to cut prices further, which would only make compound concerns about the bottom line.

Tesla is hoping the successful launch of its robotaxi program could be a catalyst, but that could turn out to be a disappointing development for the company given the potential for regulatory issues and other hurdles.

As difficult as conditions are for Tesla right now, they could get worse for the stock over the next five years.