Top “Magnificent Seven” Stock to Watch in 2026 After 2025’s Slump
The stock market saw significant growth in 2025, particularly with the S&P 500 increasing by over 16% and the Nasdaq Composite finishing up more than 20%. However, among the leading “Magnificent Seven” tech stocks, Amazon underperformed, closing the year with only a 5% gain, marking the weakest performance in the group. Despite this, many analysts view Amazon as a prime candidate for a comeback in 2026.
Amazon’s E-Commerce Transformation
Amazon, a leader in e-commerce, has transformed its operations to enhance efficiency. The company’s e-commerce division was once its main revenue source but often faced tight profit margins. Recent investments in robotics and automation have allowed Amazon to significantly reduce costs. It is estimated that by the end of 2025, Amazon will have approximately 40 robot-equipped fulfillment centers, potentially saving around $4 billion.
Key Financial Metrics
- Current Price: $239.36
- Change: +0.49% ($1.18)
- Market Capitalization: $2.6 trillion
- Day’s Range: $236.41 – $239.57
- 52-Week Range: $161.38 – $258.60
- Volume: 1.2 million
- Average Volume: 45 million
- Gross Margin: 50.05%
- P/E Ratio: 34.2
Emerging Advertising Segment
Amazon’s advertising business has started to garner more attention. In the third quarter, this segment saw a remarkable growth rate of 24% year-over-year. It accounted for a smaller portion of total revenue but delivered a disproportionate share of operating income.
Revenue Breakdown
- Advertising Service: Up 24% year-over-year
- Amazon Web Services (AWS): Up 20%
- Third-party Seller Services: Up 12%
- Subscription Services: Up 11%
- Online Stores: Up 10%
- Other: Up 8%
- Physical Stores: Up 7%
The advertising segment, while not as large as e-commerce or AWS, boasts high margins. Unlike the tight margins associated with e-commerce, Amazon can leverage its existing traffic with minimal additional costs for ad placements on platforms such as Prime Video and various retail pages.
Valuation Insights
As of early 2026, Amazon’s stock trades at a price-to-earnings ratio of approximately 34.2. While this is not the lowest valuation in the tech sector, it is notably lower than Amazon’s historical averages and cheaper than most of its peers in the “Magnificent Seven.” Analysts suggest that the market may be undervaluing Amazon by primarily focusing on its cloud business, overlooking the potential from its enhanced e-commerce operations and advertising growth.
In conclusion, although Amazon underperformed in 2025, its strategic investments in automation and growth in advertising make it a compelling stock to watch in 2026.
