CNBC’s Jim Cramer has made the argument that one of the seven popular names included in the so-called “Magnificent Seven” — a group of mega-cap tech stocks — should be removed from the index.
What To Know: Cramer was credited with coming up with the “FAANG” acronym that was long used to describe a handful of the most dominant public mega-cap tech companies.
As Microsoft Corp MSFT shares surged last year, driven by the artificial intelligence (AI) boom, investors and analysts began testing several other acronyms that would better represent the biggest mega-cap players before the “Magnificent Seven” name ultimately stuck.
The group of tech juggernauts that have historically outperformed broader markets currently includes Apple Inc AAPL, Microsoft, Alphabet Inc GOOG, Amazon Inc AMZN, Meta Platforms Inc META, NVIDIA Corp NVDA and Tesla Inc TSLA.
Monday On CNBC’s “Squawk On The Street,” Cramer suggested that Tesla should be left out of the index given its recent underperformance.
“Well, I got to tell you, the ‘Super Six’ is so strong, it’s amazing,” Cramer said. “Catch that? ‘Super Six’ because Tesla is no longer.”
Tesla shares are off to a slow start in 2024 having already given up approximately 16% and the stock has been stuck in a longer-term downtrend since the end of 2021.
Cramer doesn’t expect that to turn around anytime soon, he said, pointing to a new note from Morgan Stanley’s Adam Jonas.
Jonas cut Tesla estimates for earnings, margins and free cash flow on Monday ahead of the EV maker’s quarterly results, which are due Wednesday after the bell.
“That’s what made me go ‘Super Six,'” Cramer said.
“I thought this piece read … like look out! You’re not going to have a great quarter.”
If Tesla shares continue to underperform the rest of the Magnificent Seven, Cramer suggested there’s no place for Tesla in the index.
According to estimates from Benzinga Pro, analysts expect Tesla to report earnings of 74 cents per share on quarterly revenue of $25.547 billion this week. Last quarter, Tesla reported its smallest profit in two years and missed Street expectations on both the top and bottom line for the first time since 2019.
Investors will be paying close attention to margins when the Austin, Texas-based company reports next week given the continued price cuts from the EV maker. Total operating margins came in at 7.6% in the third quarter, down significantly from 17.2% on a year-over-year basis.
TSLA Price Action: Tesla shares were down 2.51% at $206.87 at the time of publication, according to Benzinga Pro.
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