Large-cap companies, or those with market capitalizations of $10 billion or more, are generally thought of as more appealing than small-cap companies. That is because these $10 billion-plus businesses have proven models and typically have survived previous economic downturns. They also have diversified revenue streams, strong balance sheets, positive cash flows, and access to capital.
Companies that have market caps above $1 trillion are even more appealing. They are a select, elite group, although CNBC Mad Money host Jim Cramer predicted that a few companies might join the list in 2025. Two of those names are Broadcom (AVGO) and Tesla (TSLA).
Stock #1: Broadcom
With a market cap of $913.2 billion, Broadcom is a formidable player in the semiconductor and infrastructure software industries. Broadcom’s product portfolio serves a wide range of markets, including data centers, networking, software, broadband, wireless, storage, and industrial applications. Cramer believes Broadcom’s importance in data centers and graphic chips, which are required for the burgeoning artificial intelligence (AI) sector, will propel it into the $1 trillion club again. In December 2024, Broadcom crossed the $1 trillion mark after it reported strong full-year 2024 results.
AVGO stock is down 17% year to date, while the tech-heavy Nasdaq Composite ($NASX) has fallen 8.5%. Nonetheless, Wall Street estimates 29% upside potential based on a mean target price of $251.17. Furthermore, its high price estimate of $300 suggests that the stock could rise by 54.5% over the next 12 months.
Broadcom’s financial trajectory has been marked by consistent growth driven by its offerings, which range from semiconductor solutions to infrastructure software, and serve a global clientele. In the most recent first quarter of its fiscal 2025, the company reported adjusted earnings per share (EPS) of $1.60, a 45% increase over the previous year. Revenue rose 25% to $14.9 billion. AI-related revenues for the company totaled $4.1 billion in the first quarter.
Broadcom’s growth strategy has been significantly boosted by strategic acquisitions. Its software footprint has grown significantly, particularly with the acquisition of VMware in 2023. This acquisition expanded its hardware capabilities while also providing a more comprehensive suite of solutions to its customers. Infrastructure software revenue rose by 47% year-over-year to $6.7 billion.
Management anticipates AI semiconductor revenue of $4.4 billion, bringing total revenue up 19% to $14.9 billion in Q2.
On Wall Street, AVGO stock is a “Strong Buy” overall. Out of the 33 analysts covering the stock, 30 rate it a “Strong Buy” and three recommend a “Hold.”
Stock #2: Tesla
With a market cap of $797.9 billion, automaker Tesla is on track to become a $1 trillion company again. The company previously entered the $1 trillion market cap club once in October 2021, and then again in September 2022. Recently, the stock touched the $1 trillion mark again in November 2024 after President Donald Trump was relected. Investors believe a Trump presidency will be beneficial for the EV company.
While automobiles remain its core business, Tesla has expanded into energy, AI software and hardware, storage, and robotics. Jim Cramer believes this will help justify the company’s run back to $1 trillion.
Recently, many analysts have expressed concern about Tesla stock due to potential delivery shortfalls. Additionally, political factors continue to impact Tesla. CEO Elon Musk’s role in Trump’s administration has sparked boycotts and protests, reducing sales, particularly in Europe. Trump even purchased a new Tesla to show his support for Musk and his company in the face of these challenges. Tesla stock is down 42% year to date and has fallen more than 50% from its 52-week high.
Tesla’s automotive business has struggled due to product saturation and intense competition. In the fourth quarter, total automotive revenue decreased 8%. Cramer believes Tesla’s energy business could push the company toward a $1 trillion valuation again. In the fourth quarter, revenue from energy generation and storage surged 113%, while revenue from services and other activities increased 31%.
For the full year, automotive revenue declined 6%, while energy generation and storage rose 67%, and services and other revenue increased 27%. Overall, total revenue in fiscal 2024 rose 1% to $97.7 billion, though adjusted earnings per share dropped 22%. Production fell 4%, and deliveries declined 1%. Tesla plans to begin volume production of its Robotaxi, the Cybercab, in 2026. The company expects its vehicle business to return to growth in 2025, citing advances in autonomy and new product launches.
While Tesla’s diversified business has a chance of helping the company bounce back, Guggenheim analyst Ronald Jewsikow rates the stock as a “Sell,” citing the company’s likelihood of missing delivery estimates. Jewsikow expects Tesla to report 358,000 EV deliveries in the first quarter, which is lower than the Wall Street estimate of 430,000. Furthermore, the analyst believes that the “political noise” surrounding Musk and Tesla may influence consumers’ willingness to buy and reduce store traffic. He also stated that Tesla has limited room to cut prices before its free cash flow turns negative. In/the fourth quarter, the company generated $3.6 billion in free cash flow, which was down 18% from 2023.
On Wall Street, Tesla stock is rated a “Hold.” Out of the 40 analysts covering the stock, 14 recommend it as a “Strong Buy,” three as a “Moderate Buy,” 13 as a “Hold,” and 10 as a “Strong Sell.” The average analyst target price of $348.03 indicates a 45% increase from current levels. The high price estimate of $550 implies that the stock can rise by 130% in the next 12 months.
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.
