Secular growth opportunities could help these companies become massive within the long term. The exchange sell-off of 2022 led to a pointy decline within the value of some high-profile names that after traded at. The motley fool the eye-popping market cap of $1 trillion.
Tesla (TSLA -1.10%) and Meta Platforms (META -0.54%) are two big tech names that became trillion-dollar companies before the broad market sell-off dented their market caps significantly. Tesla, as an example, currently features a market cap of $840 billion. But the electrical vehicle specialist was trading above the $1 trillion market cap milestone in October 2021.
Similar to how the stock of Meta Platforms has plummeted, it now has a market cap of $366 billion. The social media giant had hit a $1 trillion market cap in June last year when it absolutely was called Facebook.
Meanwhile, high-flying semiconductor company Nvidia (NVDA -0.66%) was near hitting the $1 trillion milestone at the tip of last year, when its market cap stood at over $800 billion. But the 58% decline in Nvidia stock this year has brought its market cap right down to $304 billion. But do not be surprised to work out these three tech giants regain the $1 trillion market cap milestone within the following decade, or even sooner.
Let’s have a look at why which will be the motley fool case.
Table of Contents
1. Tesla Is On The Verge Of Surpassing $1 Trillion Again
Among the three businesses mentioned, Tesla is the closest to the $1 trillion milestone. And also the company could hit that mark well within the following 10 years given its impressive growth and also the massive opportunity in electric vehicles (EVs). Tesla could be a high-growth company whose revenue shot up 42% year over year within the second quarter of 2022 to $16.9 billion.
What’s more, the corporate is additionally enjoying solid pricing power, as a rise within the average price of its vehicles led to an improvement of 358 basis points in its operating margin during the quarter to 14.6%. The solid top-line growth and also the margin expansion led to 57% year-over-year growth in adjusted earnings to $2.27 per share in Q2. With the worldwide electric vehicle market expected to clock a compound annual rate (CAGR) of 29% through 2030 and hit annual sales of 31.1 million units as compared to 2.5 million units in 2020, Tesla encompasses a lot of room to sustain its terrific growth. Of course, the growing competition within the EV space are going to be a challenge for Tesla, but it’s worth noting that the corporate is successfully growing despite that.
In the second quarter of 2022, Tesla’s market share of battery electric vehicles in important markets like China, Europe, and the US fell to 15.6% from 25% in the second quarter of 2020. However, the company’s deliveries have increased by an enormous 180% during that period. Tesla delivered nearly 255,000 vehicles within the second quarter of 2022, compared to just about 91,000 a pair of years prior.
Given that Tesla is aggressively expanding its capacity to require advantage of the secular growth in EVs, it’s not surprising to determine that analysts predict its earnings to extend at an annual pace of 55% over the subsequent five years.
Additionally, Tesla’s median Wall Street price target of $329 per share points toward a 23% upside from this levels over the following 12 months, taking this electric vehicle company’s market cap beyond $1 trillion.
2. Nvidia’s Multiple Catalysts Could Make It A Trillion-Dollar Company
Nvidia is in a very rough patch this year due to the slowdown in demand for graphics cards employed in gaming personal computers (PCs), and it recently stumbled upon a replacement headwind within the data center business after the U.S. government imposed restrictions on sales of chips to China.
Investors, however, would had best to specialize in the larger picture. That’s because Nvidia is that the leading player in an exceedingly number of massive markets that are built for long-term growth, and it’s also pursuing opportunities in emerging areas like automotive and digital twins. For instance, Nvidia controlled 79% of the marketplace for gaming graphics cards within the second quarter of 2022. This market is in bad shape at once because of an oversupply caused by weak demand and better supply.
However, true should improve within the future, as sales of gaming graphics cards are expected to extend at an annual pace of 14% through 2026, presenting a solid opportunity for Nvidia to grow revenue due to its impressive market share. Meanwhile, Nvidia’s growing influence in nascent areas like digital twins could supercharge the company’s long-term growth by opening a full new opportunity to tap.
All this explains why Nvidia’s earnings are still expected to clock annual growth of 23% for the following five years despite the challenges it’s faced in 2022, per consensus estimates. Applying analysts’ projected earnings growth to its current fiscal year’s estimated earnings of $3.37 per share would translate into a bottom line of nearly $9.50 per share after five years. Our five-year price target for Nvidia is $380 when we multiply the motley fool anticipated earnings by the company’s five-year average forward earnings multiple of 40.
That points toward 210% gains from this levels. As Nvidia contains a market cap of $304 billion now, a 210% gain in five years implies that the corporate would be worth near $950 billion in 2027. And if we consider that this tech giant has solid catalysts that might help sustain the motley fool its outstanding growth for the following decade, it wouldn’t be surprising to work out it attain a $1 trillion market cap within the following 10 years.
3. Meta Platforms Has Work To Try To, But It Could Get There
Meta Platforms’ spectacular go over the past year approximately will be attributed to multiple factors. A slowdown in ad spending, surging inflation, and macroeconomic uncertainty have created an unfavorable operating environment for the corporate. That’s why analysts expect Meta’s top line to stay flat in 2022 at $118 billion. The company’s earnings are expected to drop to $9.87 per share this year from $13.77 in 2021.
What’s more, Meta’s move to cut back its expenses for 2022 by keeping a handle on hiring, or perhaps resorting to layoffs, indicates that the social media giant is sure tough times. But there are some reasons why Meta’s tough times won’t last forever, and the motley fool therefore the company should eventually pop out of its slump within the future.
For instance, annual digital ad spending is predicted to leap from $521 billion in 2021 to $876 billion in 2026, in step with eMarketer. together with Alphabet, Meta is that the other massive player within the digital ad spending space, with the 2 companies holding a combined market share of 53.2% last year. Meta alone generated $115 billion in advertising revenue last year, which implies that it controlled around 22% of this space as per the motley fool eMarketer’s industry revenue estimate.
Of course, growing competition from the likes of Amazon and Apple is anticipated to place Meta’s market share harassed. But the latter’s move to create money from advertising in emerging niches like the metaverse could help it sustain its solid share and improve its top line. This explains why analysts expect Meta’s revenue to start out growing another time from next year and accelerate in the motley fool 2024.
If Meta retains a 20% share of the digital ad spending market in 2026, then its top line could increase to $175 billion supported eMarketer’s forecast. This excludes the potential gains from emerging catalysts like the metaverse. Multiplying this potential revenue estimate by Meta’s five-year average sales multiple of nine would translate into a market cap of well above $1 trillion.
But if we commit to use a lower sales multiple to account for the competition that would arise within the next few years parenthetically a price-to-sales ratio of 5 after five years Meta would be near hitting the milestone it had achieved last year in the motley fool.
In all, Meta looks well-placed to become a trillion-dollar company over the long term, which is why buying the stock feels like a decent idea because it is trading at just 11 times trailing earnings right away. the motley fool
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