Top “Magnificent Seven” Stock Pick for 2026 After Disappointing 2025
The stock market showed strong performance in 2025, with notable growth in major indices. The S&P 500 rose over 16%, the Nasdaq Composite increased by more than 20%, and the Dow Jones Industrial Average saw a gain of nearly 13%. Within this successful landscape, the “Magnificent Seven” stocks thrived, fueled by the ongoing artificial intelligence (AI) boom.
However, one stock in this elite group, Amazon (AMZN), experienced a disappointing year. The e-commerce giant’s shares only rose approximately 5%, marking it as the underperformer among its peers. Despite this setback, analysts forecast a brighter future for Amazon as 2026 approaches.
Amazon’s E-Commerce Efficiency Improvements
Amazon revolutionized online shopping, making it a household name in e-commerce. Historically, its business model operated with slim margins, often leading to overall financial losses. Recently, however, Amazon has made significant investments in robotics and automation. This shift is expected to enhance operational efficiency and cut costs dramatically.
By the end of this year, Amazon is projected to operate close to 40 robotic fulfillment centers. These advancements could result in estimated savings of up to $4 billion, as noted by Morgan Stanley.
Key Financial Data
| Current Price | Market Cap | Price-to-Earnings Ratio | Day’s Range | 52-Week Range |
|---|---|---|---|---|
| $239.36 | $2.6T | 34.2 | $236.41 – $239.57 | $161.38 – $258.60 |
Emerging Revenue Streams
Amazon Web Services (AWS) remains a critical component of Amazon’s financial performance. In the third quarter, AWS contributed approximately 18% of total revenue, amounting to $33 billion, but generated over 65% of Amazon’s operating income, around $11.4 billion.
Another significant growth area for Amazon is its advertising segment. In terms of year-over-year growth, the advertising service witnessed a remarkable increase of 24%. This performance stands out against other segments like AWS (+20%), subscription services (+11%), and online stores (+10%).
Advertising Business Growth
- Advertising service: +24% year-over-year
- AWS: +20% year-over-year
- Third-party seller services: +12% year-over-year
- Subscription services: +11% year-over-year
- Online stores: +10% year-over-year
- Other: +8% year-over-year
- Physical stores: +7% year-over-year
Amazon’s advertising business, while not as large as its e-commerce or AWS divisions, is profitable and growing quickly. The company leverages its existing traffic to sell advertisement space efficiently, with minimal incremental costs.
Amazon’s Valuation Outlook
Currently, Amazon’s stock is trading at a Price-to-Earnings ratio of 34.2, which, while not cheap, is lower than its five-year average. Compared to other companies in the Magnificent Seven, it is also less expensive than all but Alphabet and Microsoft.
This valuation suggests the market hasn’t fully recognized Amazon’s potential in e-commerce margin expansion and the growth of its advertising segment. As Amazon continues to enhance its operations and capitalize on these profitable avenues, it could emerge as a compelling investment opportunity in 2026.
