This has been a remarkable year for U.S. stocks, with the recent post-Fed rally lifting the S&P 500 Index ($SPX) to its highest levels of 2023. However, this year will probably be best remembered for the artificial intelligence (AI) pivot, which helped Nvidia (NVDA) become the first chip designer to join the ranks of $1 trillion companies.
Over the last couple of years, there has been a big churn in trillion-dollar companies. In 2021, both Tesla (TSLA) and Meta Platforms (META) joined the exclusive trillion-dollar club, only to drop out in 2022 - which was a terrible year for tech stocks.
Despite the monstrous rally in 2023, with both Meta and Tesla among the top 10 S&P 500 gainers, the market caps of both companies are still below $1 trillion. But could they reclaim their $1 trillion market cap titles in 2024? We’ll explore in this article.
Tesla Could Join the Trillion-Dollar Club
Tesla’s market cap topped $1.2 trillion at its peak in Q4 2021, and currently stands just north of $805 billion. To rejoin the $1 trillion club, Tesla shares need to rise just about a quarter from these levels.
Tesla stock has more than doubled in 2023, and defied all the pessimism over demand for electric vehicles (EVs) and the resulting margin compression amid the price war. Notably, Tesla’s 2023 price action looks remarkable when we see it in the context of the bloodbath in startup EV companies, as well as legacy automakers.
For instance, both Ford (F) and General Motors (GM) are underperforming markets by a wide margin – while names like Fisker (FSR) and Lucid Motors (LCID) have hit new record lows this year, with LCID also losing its position in the Nasdaq-100 Index ($IUXX). Things have been no different for other EV stocks, and we also had the bankruptcy filing from Lordstown Motors (RIDEQ).
Tesla Stock Rallied in 2023
Incidentally, one of the reasons TSLA shares rallied in 2023 was because of its established preeminence in the EV industry, with most other companies struggling to cope amid slower-than-expected demand and spiraling losses.
Despite the price war, Tesla still commands a healthy operating margin of around 8%. It has the wherewithal to steer the U.S. EV industry – which was quite evident when multiple automakers agreed to make its charging standard the de facto standard in the U.S. While Tesla faces several headwinds - especially in China, where homegrown automakers are giving it a tough fight - I believe the stock is a strong contender to enter the $1 trillion club next year.
Meta Fell Out of the Trillion Dollar Club in 2021
Like Tesla, Meta Platforms’ market cap also peaked in 2021. It subsequently lost its status as a $1 trillion company, and was the worst-performing FAANG stock of 2022. It’s been a big reversal for the Facebook parent this year, and it is not only the best-performing FAANG stock in 2023, it's also the second-best S&P 500 stock.
This year, Meta impressed markets with its cost-cutting efforts, with CEO Mark Zuckerberg’s “year of efficiency” showing good results. The company also returned to double-digit revenue growth after reporting its first revenue decline in 2022. Meta’s 2024 outlook also appears positive, as the company’s AI initiatives start reflecting in the top line as well as the bottom line. While Zuckerberg did not specifically term 2024 as the “year of AI,” the overall tone of the Q3 earnings call seems to suggest as much.
There are valid near-term concerns about Meta as geopolitical turmoil takes a toll on business sentiments, but I believe that with an aggressive pivot to AI, the Menlo Park-headquartered company is setting the stage for long-term outperformance.
Meta Stock Forecast
Meta’s market cap is currently above $850 billion, and it needs to rise just about 16% to reenter the $1 trillion club. Going by consensus estimates, Meta looks set to be a trillion-dollar company in 2024, as its mean target price of $383.22 implies a market cap quite close to $1 trillion.
Meta’s current next-12-month price-to-earnings multiple of 19.74x might not exactly be mouthwatering, but the company should see continued earnings growth, with analysts predicting net income to rise 22.7% in 2024. A Fed pivot to rate cuts, coupled with the projected double-digit earnings growth, could help Meta become a trillion-dollar giant in 2024.
On the date of publication, Mohit Oberoi had a position in: META , NVDA , F , GM . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
