There are several candidates to be among the next trillion dollar companies.
Tesla shocked many investors during the pandemic and trounced short sellers on its path to becoming a trillion dollar company.
The stock has soared by almost 1,000% over the past five years and has gone through multiple stock splits. Tesla had its first annual profit in 2020 and has held onto double-digit profit margins.
Investors who held onto Tesla stock since the pre-pandemic days were rewarded well, but Tesla won’t be the last company to reach the trillion dollar level. Nvidia crossed the mark a few weeks ago, and it won’t be the last either.
These high growth stocks seem poised to reward long-term investors and become the next trillion dollar companies.
Companies closer to the trillion dollar mark have a greater chance of reaching those levels in the future. Broadcom (NASDAQ:AVGO) currently has a market cap above $350 billion and has enjoyed significant appreciation because of the AI boom.
The semiconductor giant already had attractive top and bottom line growth before artificial intelligence became mainstream. However, this extra tailwind and other parts of the business model can help the company exceed $1 trillion in a few years.
If Broadcom’s valuation surpasses $1 trillion, it will join Nvidia, another semiconductor giant that benefits from the AI tailwind. Semiconductor chips are vital for artificial intelligence tools and many other products.
These chips find themselves in computers, cars, smartphones, washing machines, refrigerators, microwaves, air conditioners, and gaming consoles.
The recent surge brought Broadcom’s P/E ratio above 26, which isn’t a nosebleed valuation because of the company’s solid business model. Comfortable double-digit revenue and earnings growth before the AI boom has helped the company earn a 19 forward P/E ratio.
Investors who can wait 5-10 years may see Broadcom reach the trillion dollar milestone. Valuation expansion because of the AI boom can get it to the milestone sooner.
JPMorgan (NYSE:JPM) boasts a market cap above $400 billion and a P/E of 10. While the P/E ratio is lower than Broadcom’s, a lower P/E is expected in the banking industry. JPMorgan has a solid business model with profit margins above 30% and a dividend yield approaching 3%.
Although it has the potential to become a trillion dollar company, investors may have to wait over a decade to see it happen.
A PEG ratio near 3 and weaknesses in the banking and lending industries can make the bank’s path to a trillion dollar market cap more difficult. However, it is the largest bank by market cap and is almost halfway to a $1 trillion valuation.
Recent banking jitters led by the collapse of Silicon Valley Bank are fresh on investors’ minds. While the news is a reason for concern for regional banks, large banks like
JPMorgan can benefit from the banking woes as people decide to put their money into household names. It will take a long time for JPMorgan to join the trillion dollar club, but you get to enjoy the dividend along the way.
Shopify (NYSE:SHOP) is a pandemic darling stock that has been a volatile e-commerce play.
The company is up by almost 300% over the past five years but is down by over 60% from its all-time high. Shopify represents the highest potential gains out of the companies on this list since it carries an $83 billion market cap. The stock would have to grow by more than 10x to join the trillion dollar club.
The stock certainly has enthusiasm behind it, as it has nearly doubled in 2023. Tesla experienced several rips and sharp declines before reaching the $1 trillion milestone.
Shopify still exhibits strong top-line growth as evidenced by a 25% year-over-year revenue increase in Q1 2023. Rising costs and an excessive valuation hampered the company and caught up with the stock in 2022, but 2023 has been a different story.
Leadership’s efforts to reduce costs in 2023 have put Shopify back to profitability and are responsible for the stock’s recent rally. Shopify completed its sale of Shopify Logistics to Flexport and trimmed its workforce to reduce costs and fuel a surprise profit in Q1 2023.
Lower costs will elevate profits and lead to a more appealing P/E ratio. While the valuation remains high, Shopify’s move to profitability and high revenue growth suggests the stock can rise higher in the years ahead.
On this date of publication, Marc Guberti has positions in AVGO and SHOP. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.