As the shining stars of the US stock market, the magnificent 7 (Mag 7) in the technology sector are always closely watched by the market.

This week, 5 tech giants will release their third-quarter financial reports.

Tesla's financial report was the first to be released last week. Despite strong performance and optimistic future car sales outlook, the market is still considering kicking it out of the Mag 7.

The financial reports of the five giants are approaching.

Last year, the stock performances of the magnificent 7 in the technology sector were very impressive. Although they have been somewhat dimmer this year, they still have achieved decent gains.

Since the beginning of this year, Nvidia has risen by over 185%, Meta by over 62%, Amazon by over 23%, Apple by over 20%, Google by over 18%, Microsoft by over 14%, and Tesla by over 8%.

With the arrival of the third-quarter earnings season of US stocks, performance has become the key factor determining stock price trends.

This week, among the Magnificent 7, five companies will announce their earnings. Tesla already announced better-than-expected earnings last week, while Nvidia's earnings will be released on November 20.

After the market close this Tuesday, Google's parent company, Alphabet, will be the first to announce its earnings.

Following that, Microsoft and Meta's earnings will be revealed after the market close on Wednesday.

After the market close on Thursday, Apple and Amazon will announce their earnings.

According to data compiled by Bloomberg Intelligence, it is expected that the average year-on-year growth of the third quarter earnings for these five companies will be 19%, far exceeding the estimated 4.3% increase in the S&P 500 index. However, this will also be their slowest profit growth in the past six quarters.

Among them, Alphabet, Google's parent company, is expected to achieve double-digit percentage year-on-year revenue growth, while Apple, Meta, and Amazon will only see single-digit revenue growth.

Currently, large technology companies such as Apple and Microsoft are valued higher than historical average levels, but Wall Street analysts still hold overwhelmingly bullish attitudes towards them.

According to data compiled by Bloomberg, about 90% of analysts have buy ratings for Microsoft, Alphabet, and Nvidia's stocks, 83% of analysts have buy ratings for Alphabet, 65% have buy ratings for Apple, while the average number for S&P 500 index companies is around 53%.

As for the reasons for this bullish sentiment, Choi from Parnassus pointed out that despite various concerns, they still offer above-average profit growth, investment opportunities in artificial intelligence, strong capital returns, and risks lower than other sector markets.

Is Tesla's Glory Fading Away?

On the other hand, despite beating third-quarter expectations,Tesla's stock price surged nearly 22% overnight,setting the largest intraday gain in over a decade, but market concerns about it still linger.

According to Yahoo News, Wall Street is once again reassessing the feasibility of including Tesla in the Magnificent 7.

Freedom Capital Markets' Chief Global Strategy Analyst Jay Woods compares Tesla to Bitcoin, suggesting that the stock's trading is more based on "hope and dreams" rather than fundamentals.

"Tesla used to be glorious... In my opinion, it's more like Cisco or Intel during the Internet bubble era, and now we are shifting to other sectors."

Before the earnings report was released, Tesla's stock price performed poorly and was overvalued, further weakening its position in the Magnificent 7. Data shows that Tesla's expected PE ratio is close to 73 times, much higher than similar companies.

According to Bloomberg data, as of last Friday, over 40% of analysts rated Tesla as a buy, making it the most disliked stock among the Magnificent 7 by analysts.

As for which company is likely to become a candidate to replace Tesla, the market generally favors Netflix.

Ayako Yoshioka from Wealth Enhancement Group points out that Netflix is "most likely" as it recently hit historic highs driven by strong earnings and solid guidance.

Since the beginning of this year, Netflix's stock price has soared by 55%, with the second-highest increase for the year after Nvidia and Meta among the seven giants.

Jesus Alvarado-Martinez of Portfolio Wealth Advisors believes that the members of the magnificent 7 are aiming to become a "cash flow machine", and Netflix "meets this criteria".

He added: "Netflix's free cash flow has always been strong... with significant profits, significant free cash flow, and a substantial number of users".

Bank of America analyst Jessica Reif Ehrlich views Netflix's continuous growth in free cash flow as a "catalyst" for its stock price, and expects its free cash flow to increase to $8.9 billion in 2025 and $11.16 billion in 2026.

Additionally, as of last Friday, 87% of analysts have rated Netflix as a buy, with only 3% of analysts recommending a sell.