The “Magnificent 7” stocks are perhaps the most talked-about in the market right now, with the S&P 500 also showing a bit of recovery. So, it’s likely these seven companies—Nvidia, Microsoft, Apple, Amazon, Tesla, Alphabet, and Meta—will keep influencing the market rally.
But here’s the catch: while these companies are at the top, their valuations can vary significantly. So, which one stands out as the “cheapest” currently? And what option strategies could be effective for that? Let’s dig into it.
Finding the Most Affordable Stocks in MAG-7
To pinpoint undervalued stocks, several metrics can come in handy.
First up is the price-to-earnings ratio (P/E), a standard metric that tells investors how much they are paying for every dollar of a company’s earnings. It divides a company’s stock price by its earnings per share, either from the last 12 months or projected for the next 12 months.
A lower P/E is generally better, but what counts as “low” can be pretty subjective. Investors often compare it to the broader sector or a group of similar companies to get context.
There’s also the price-to-earnings growth (PEG) ratio, which gauges how a stock’s valuation aligns with its expected earnings growth. You calculate this by dividing the P/E ratio by the earnings growth rate.
Essentially, the PEG provides insight into whether a P/E ratio seems cheap, fair, or high in relation to growth. A PEG of less than 1 is considered cheap, while between 1 and 1.5 is deemed reasonable, and anything above that typically signals an expensive valuation.
By combining these two metrics, we can identify which stock from the MAG-7 appears to be the best bargain right now.
If you check out the “Magnificent 7 Stocks” section under Investing Ideas on Barchart, you can click the “Screen” button to access a Stock Screener.
From there, apply the filters for Price/Earnings Forward and Impact on Price/Revenue Growth.
After running the screen, I found that META has the second-lowest PEG and the lowest P/E by a substantial margin.
This isn’t hugely surprising, given that one of Mark Zuckerberg’s tech companies took a hit following their recent quarter results due to high spending on AI development. But, as the saying goes, there’s a silver lining here—META’s valuation is relatively attractive.
Option Strategy: LEAPS Call
Typically, investors buy stocks they perceive as undervalued. Given we’re discussing options, a promising choice would be to buy long calls on at-the-money long-term equity anticipation securities (LEAPS).
LEAPS calls provide exposure to a stock’s growth over an extended period, allowing you to explore your investment thesis with less upfront cash commitment. Also, your maximum loss is limited to the premium paid when initiating the trade.
To discover available long call trades, access your Meta stock profile page, click on Long Call/Put under Option Strategies, and select the expiration date.
I generally opt for LEAPS calls that have at least a year until expiration, such as December 18, 2026, for this example.
Currently, Meta is trading around $613, with the closest strike price being $610. If you think Meta is poised for a recovery by year-end, this trade could be a good opportunity.
According to the screener, you can purchase the 610-strike ATM LEAPS call for $111.80 per share, translating to a total cost of $11,180. The deadline is December 12, 2026, about 389 days from now. However, for this trade to break even, Meta would need to exceed $720.80 in price, which highlights one downside of ATM LEAPS calls—they can be pricey.
Nonetheless, if you’re optimistic that Meta will soar, potentially reaching $1,117 within the next year, as some Wall Street analysts believe, then this 610-strike call may prove quite profitable, especially if that target is reached while there’s still time left on the option.
Final Thoughts
While the Magnificent 7 stocks are all leaders in their field, it doesn’t mean they come at the same price. Right now, Meta appears to be the most reasonably priced based on P/E and PEG metrics. The ATM LEAPS call offers significant upside potential while allowing for a longer-term commitment without having to buy the stock straightaway.
It’s crucial to keep in mind that options trading carries its own risks. Even long-term calls can lose value if the stock doesn’t perform as anticipated. Always do your homework, set clear stop-loss and take-profit levels, and trade cautiously.
