The $1 trillion market capitalization club includes some of the top companies globally that have established a strong position in their respective industries. Microsoft (MSFT) at $3.15 trillion, Apple (AAPL) at $3.01 trillion, Nvidia (NVDA) at $2.97 trillion, Alphabet (GOOGL) at $2.15 trillion, Amazon (AMZN) at $1.92 trillion, and Meta Platforms (META) at $1.25 trillion are some of the most well-known names on Wall Street and among investors.
Predicting which companies will reach $1 trillion in market cap in the next five years involves analyzing current market trends, financial health, growth potential, and industry positioning. Here are three companies that are strong contenders to enter the $1 trillion market cap club.
Contender #1: Visa
Visa (V), valued at $509.6 billion, is a leading player in the digital payments industry. The company facilitates electronic funds transfers around the world. Though Visa still has a long way to go before reaching the $1 trillion market cap, the disruptive nature of the fintech industry, combined with Visa's brand strength, represents excellent long-term opportunities.
Visa stock has gained 5.6% in 2024, compared to the S&P 500 Index's ($SPX) gain of 12.4% so far.
Visa just reported another strong quarter, with net revenue up 10% to $8.8 billion, and adjusted earnings per share (EPS) up a whopping 20% to $2.51. Both revenue and earnings exceeded analyst expectations.
The second quarter's performance was driven by a strong 8% growth in payment volume and 16% growth in cross-border volume. Despite macroeconomic concerns and geopolitical tensions, global travel demand remains strong. Consequently, management believes there is "trillions of dollars of opportunity in consumer payments" in the future.
Visa's strategic acquisitions to incorporate artificial intelligence (AI) into its product portfolio through Expel, Prosa, and Pismo will further bolster its market presence and revenue streams in the coming years.
Furthermore, its AI-powered tokenization technology saved $650 million in fraud for businesses worldwide last year. Visa has issued more than 10 billion tokens since this technology was introduced in 2014.
Visa also pays dividends, yielding 0.75%, versus the financial sector average of 3.18%. However, the forward payout ratio of 18.6% indicates that dividends are sustainable, with the possibility of future increases.
Looking ahead to the next two years, here are analysts’ projections:
- In fiscal 2024, revenue and earnings are expected to increase by 10% and 13.6%, respectively.
- In fiscal 2025, revenue and earnings are expected to increase by 10.4% and 12.4%, respectively.
Regarding valuation, Visa is currently trading at 24 times forward 2025 earnings, which is lower than its historical average price-to-earnings ratio of 34x.
Overall, Wall Street considers Visa stock a “strong buy.” Out of the 31 analysts covering the stock, 23 rate it as a "strong buy," four as a "moderate buy," and four as a "hold." The average target price of $307.86 is approximately 11.9% higher than current levels. Its high price estimate of $335 suggests that the stock could rise by up to 21.8% over the next year.
Contender #2: Broadcom
With a market capitalization of $651.8 billion, global technology company Broadcom (AVGO) is the second company I believe has the potential to reach $1 trillion in the coming years.
With AI driving the technology industry, Broadcom is solidifying its position as a global semiconductor leader. The company's business is diverse, including semiconductor solutions, infrastructure software, enterprise software, and intellectual property licensing.
The stock is up 29% year to date, outperforming the tech-heavy NASDAQ Composite ($NASX), which is up 14.5%.
Broadcom's financial performance remains strong, with significant revenue and earnings growth. Its semiconductor business grew 80% year-over-year in Q1, accounting for approximately 62% of total revenue of $11.9 billion during the period. The infrastructure software segment grew by 20% year over year. Broadcom expects the acquisition of cloud software company VMware to increase revenue in the infrastructure segment by 49% over the next three years.
While the company’s total revenue increased by 33.7%, adjusted earnings per share jumped 6.4% in the quarter.
Broadcom also pays a dividend, with a yield of 1.49%, which exceeds the tech sector average of 1.37%. Broadcom has consistently increased dividends over the last 14 years. In the fourth quarter of fiscal 2023, the company hiked its quarterly dividend by 14%. Its forward payout ratio of 36.2% suggests there is room for further hikes.
With strong financial performance and a sturdy balance sheet, Broadcom is well-positioned to capitalize on several growth opportunities in 5G, data center and cloud computing, Internet of Things (IoT), and AI in the coming years.
Looking ahead to the next two years, here’s what analysts project for Broadcom:
- In fiscal 2024, revenue and earnings are expected to increase by 40.3% and 11.9%, respectively.
- In fiscal 2025, revenue and earnings are expected to increase by 14.2% and 22.2%, respectively.
Priced at 24 times forward 2025 earnings and 11 times forward sales, Broadcom stock is a reasonable buy compared to its semiconductor rivals.
Overall, on Wall Street, AVGO stock is a “strong buy.” Out of the 29 analysts that cover the stock, 26 suggest it is a “strong buy,” and three recommend a “hold.” AVGO’s mean target price of $1,560.60 implies the stock has a potential upside of 8.3% from current levels. Plus, its high price estimate of $1,850 suggests the stock could go as high as 28.4% in the next 12 months.
Contender #3: Eli Lilly
Valued at $807 billion, biotech firm Eli Lilly (LLY) has piqued the interest of analysts and investors with its weight-loss drugs Mounjaro and Zepbound.
The weight-loss drug market is expected to be worth $82.8 billion in 2032. While this is a significant opportunity for Eli Lilly, the company is also developing treatments for diabetes, Alzheimer's, cancer, autoimmune diseases, and other conditions. It has a robust pipeline of innovative drugs. In comparison to the broader market, Eli Lilly stock is up 48.4% year to date.
Besides its other successful drugs, Mounjaro and Zepbound have been boosting Eli Lilly’s financials. In its recent first quarter, revenue jumped 26% to $8.7 billion, owing primarily to sales of Mounjaro, Zepbound, Verzenio (used to treat advanced or metastatic breast cancers), and Jardiance (used to treat type 2 diabetes).
Adjusted earnings increased 59% to $2.58 per share in the quarter. Research and development (R&D) expenses increased 27% to $2.52 billion in the period. Lily’s commitment to advancing its pipeline is evident from the increase in R&D expenses.
Driven by this excellent quarter, management raised revenue guidance for the full fiscal year 2024 to a range between $42.4 billion and $43.6 billion. Adjusted EPS is expected to be in the $13.50 to $14.00 range.
Eli Lilly has a proven track record of innovation and financial success. It also has an extensive pipeline of drugs in various stages of development. The company's ability to bring new, innovative drugs to market leads me to believe it will soon join the $1 trillion market cap club.
Additionally, LLY offers a dividend yield of 0.61%, backed by 9 years of consecutive growth.
Looking ahead to the next two years, here’s what analysts project for Eli Lilly:
- In fiscal 2024, revenue and earnings are expected to increase by 25.9% and 117.6%, respectively.
- In fiscal 2025, revenue and earnings are expected to increase by 22.4% and 38.2%, respectively.
Out of the 21 analysts covering the stock, 18 rate it a “strong buy,” one rates it a “moderate buy,” and two rate it a “hold.” Eli Lilly is trading way ahead of its average target price of $814.09.
However, its high target price of $1,023 implies a potential upside of 18.3% from current levels.
The Key Takeaway
These companies have strong market positions, innovative products and services, and significant growth potential in their respective industries. While market dynamics can change, Visa, Broadcom, and Eli Lilly appear to be solid candidates for reaching the $1 trillion market cap milestone in the next five years.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
