How to Ride Meta's 80% Rally With One Smart Options Trade

Core Viewpoint - The "Magnificent 7" stocks, which include Nvidia, Microsoft, Apple, Amazon, Tesla, Alphabet, and Meta, are currently leading the market rally, particularly as the S&P 500 shows signs of recovery. However, their valuations vary significantly, making some stocks more attractive than others [1]. Valuation Metrics - The price-to-earnings (P/E) ratio is a primary metric used to assess stock valuation, indicating how much investors are willing to pay for $1 of earnings. It is calculated by dividing the stock price by earnings per share [3]. - A lower P/E ratio is generally considered better, but "low" is relative and should be compared to the broader sector or a specific group of companies [4]. - The price-to-earnings-to-growth (PEG) ratio is another important metric that evaluates a stock's valuation in relation to its expected earnings growth. A PEG of less than one is considered cheap, around 1 to 1.5 is fair, and above 1.5 is expensive [5]. Current Findings - After screening the Magnificent 7 stocks, Meta (META) was identified as having the second-lowest PEG and the lowest P/E by a significant margin, indicating it may be the "cheapest" stock among the group [8]. - This valuation is not surprising given that Meta has faced challenges following its Q3 financials, which revealed substantial spending on AI initiatives [9].