Stock investors should consider several names before the end of 2024, as the AI revolution is poised to intensify. Notable picks for 2025 include Apple and Amazon, both leaders within the Magnificent Seven stocks.
Apple positions for AI leadership
Apple (NASDAQ:AAPL) has seen its shares rise approximately 37% in 2024, closing the year with a trailing price-to-earnings (P/E) ratio near 42. Despite concerns over valuation, the company’s latest iOS update, iOS 18.2, introduces new Apple Intelligence features, setting the foundation for future advancements in personalized AI.
iOS 18.2 includes additions such as Genmoji and Image Playgrounds, although some critics view these developments as underwhelming. Nevertheless, Apple’s strategy focuses on gradual improvements and safety in AI, which may yield long-term benefits.
Investors are closely monitoring actions from prominent shareholders like Warren Buffett, who has been selling shares of Apple, potentially indicating caution in the stock’s elevated valuation at over $255 per share.
Amazon’s growth potential in AI
Amazon (NASDAQ:AMZN) is positioned for significant growth, especially as consumer spending increases. The e-commerce giant’s plans to enhance delivery speeds and its efforts in artificial intelligence could substantially improve margins. Citi considers Amazon a top internet pick, setting a $275 price target that implies nearly 24% upside from its current price of around $223.
Additionally, Amazon aims to streamline its corporate structure by cutting thousands of manager roles, intending to decrease the ratio of managers to contributors by at least 15% by the second quarter of 2025. This could result in savings of approximately $3 billion.
The company also aims to leverage advancements in automation and robotics within its warehouses, potentially leading to significant margin improvements in the coming years.
Walmart continues to thrive
Walmart (WMT) has experienced a prosperous year, with stock increasing by 73% in 2024. The company is enhancing its e-commerce capabilities, evidenced by a 27% rise in e-commerce sales for the 2025 fiscal third quarter, alongside an overall 5.5% increase in total sales.
Walmart’s extensive physical store network allows it to offer services, such as in-store pickup, that competitors like Amazon cannot match. The retailer is also targeting a more affluent clientele by expanding its product offerings.
Potential for Nike’s recovery
Nike (NKE) has seen its stock drop 57% from its peak three years ago. The company is adjusting its inventory strategy to place greater emphasis on sports products, as it aims to recover from a revenue decline of 8% year over year in the most recent fiscal quarter.
Despite a high price-to-earnings (P/E) ratio of 35 based on expected fiscal 2025 earnings, Nike’s shares are reportedly at their lowest price-to-sales ratio in a decade, making them an attractive prospect for long-term investors.
Dollar General’s turnaround strategy
Dollar General (DG) faces a challenging landscape, with its stock down 71% from its peak in 2022. However, the company remains well-positioned for a comeback due to an attractive P/E ratio of 12.5, significantly lower than Walmart’s 38.
The retailer comprises over 20,000 locations, allowing it to offer same-day delivery options in partnership with DoorDash in a significant number of stores. Dollar General is implementing a “Back to Basics” strategy to improve operations, which includes enhancing inventory management and staffing efficiency.
With the easing of inflation pressures, Dollar General aims to improve margins while offering a dividend yield of approximately 3%, presenting a potential upswing in stock value over the coming years.
Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.
Featured image credit: Kerem Gülen/Midjourney
