Wall Street tends to offer only one guarantee: change. Over time, today's largest companies by market cap are liable to be replaced by new and innovative businesses.
For instance, only one of the 10 largest publicly traded companies in 1999 is still among the top 10 by market cap today (Microsoft). The other nine stocks, which included the likes of Nokia and AIG, have fallen far down the list.
The same fate may await tech kingpin Apple (AAPL 0.31%).
Apple sits atop Wall Street's pedestal... for now
For the time being, Apple sits on a pedestal above all other U.S.-listed stocks with a market cap of more than $2.4 trillion -- and it's not hard to understand why. To begin with, Apple has one of the most-recognized brands in the world, as well as a highly loyal customer base. Anytime a new product launches, it's not uncommon to see lines wrapped around Apple's retail stores.
To build on this point, the company holds half of the U.S. smartphone market share, according to data from Counterpoint, which demonstrates how innovation has driven consumers to the iPhone brand for well over a decade. Furthermore, Apple CEO Tim Cook is overseeing a steady operating transition that emphasizes subscription services over physical products. While this doesn't mean Apple is giving up on iPhone and Mac innovation, it simply means the company is focusing on higher-margin, loyalty-building subscriptions that diversify its revenue stream and make product-replacement cycles less turbulent.
These could be the world's largest stocks by 2040
But even Apple isn't perfect. The company's sales growth has slowed considerably, and persistent share buybacks are accounting for a significant portion of forecast earnings growth. It's plausible that Apple's best days are now in the rearview mirror. What follows are three stocks that could, under the right circumstances, leapfrog Apple in market cap by or before 2040.
The no-brainer choice: Amazon
Although Microsoft is a legitimate choice to overtake Apple in market value in the next 18 years, it's e-commerce behemoth Amazon (AMZN -0.16%) that looks like the no-brainer selection to potentially become the world's largest stock by market cap.
As many of you are probably aware, Amazon is the undisputed leader in online retail sales. A March 2022 report from eMarketer estimates that the company will bring in 39.5% of all U.S. online spending this year. That's more than 8 percentage points higher than No. 2 through No. 15 in market share, combined!
Such online retail domination is what's helped the company sign up 200 million people worldwide to a Prime membership. The annual fees collected from Prime members plays a key role in helping Amazon undercut traditional retailers on price, as well as supports investments in its vast logistics network.
However, online retail isn't the catalyst that could allow Amazon to surpass Apple. That distinction goes to its cloud infrastructure service segment, Amazon Web Services (AWS), which accounts for about a third of global cloud infrastructure spending.
More importantly, cloud spending is still in its early innings, with cloud services yielding considerably higher operating margins than online retail. Hypothetically speaking, Amazon's retail sales could shrink, yet the company's operating cash flow would continue rising due to steady double-digit growth in AWS.
In addition to AWS, Amazon is benefiting from double-digit sales growth in its other higher-margin operating segments, such as advertising and subscription services. As long as the cash-cow segments continue to outperform, Amazon has a reasonably good chance of overtaking Apple well before 2040.
If everything went just right: Meta Platforms
Another stock with the tools and intangibles necessary to surpass Apple in market value by or before 2040 is Meta Platforms (META -1.52%), the company previously known as Facebook. But unlike Amazon, it'll need a few dominoes to fall its way to overtake Apple.
Even though social media stocks have been exceptionally volatile of late, Meta is the clear leader in the industry. Its social destinations (Facebook, WhatsApp, and Instagram) are consistently among the most downloaded. When the first quarter came to a close, Meta's family of apps counted 3.64 billion monthly active users.
Put another way, over half the adult population in the world interacts with a Meta-owned asset each month. That's plenty of incentive for businesses to pay top dollar to get their messages in front of users.
What's more, Meta CEO Mark Zuckerberg hasn't meaningfully monetized all of his company's core assets. The vast majority of Meta's ad revenue derives from Facebook and Instagram. If and when the company opens the spigot for Facebook Messenger and WhatsApp, Meta's growth and operating cash flow can push into a higher gear.
The real wildcard for Meta Platforms is the development and evolution of the metaverse -- i.e., the next iteration of the internet, which allows connected users to interact with each other and their environment in 3D virtual worlds. Meta plans to invest tens of billions of dollars in the metaverse, with the expectation of becoming a leader in what could well be a multitrillion-dollar opportunity. The unknown here is how long it'll take to get the infrastructure needed to support the metaverse in place.
If the metaverse ultimately matures faster than expected, and Meta Platforms becomes one of the on-ramps to virtual and augmented reality, it could have a clear path to overtake Apple.
The long shot: Sea Limited
If you want a true longshot that can surpass Apple in under two decades, consider Singapore-based conglomerate Sea Limited (SE -1.42%).
Sea is a long shot for a couple of reasons. For starters, it trails Apple by a mile in valuation ($46.4 billion market cap vs. Apple's $2.42 trillion). The company is also losing quite a bit of money as it reinvests in its three core operating segments.
Whereas Apple brought in north of $116 billion in operating cash flow over the trailing-12-month period, Sea endured an operating cash outflow of $833.3 million in the comparable time frame. But over the next 18 years, Sea could deliver eye-popping sales and (eventually) profit growth.
At the moment, Sea's gaming division, known as Garena, is the only segment producing positive earnings before interest, taxes, depreciation, and amortization (EBITDA). Mobile game Free Fire has been a global hit, with close to 616 million people actively playing it and other mobile games during the first quarter.
What's important is that 10% of these quarterly active users are paying to play. This pay-to-play conversion ratio is many multiples higher than the industry average.
The second operating segment of interest is digital financial services. The number of quarterly active users accessing its SeaMoney products and services, such as digital wallets, grew 78% through March 31, 2022 to 49 million. A number of markets Sea is focused on have limited access to basic banking solutions. Thus, providing access to banking solutions via digital wallets could be a game changer for Sea and its emerging-market customers.
Lastly, Sea has a burgeoning online retail-sales segment, known as Shopee, which has consistently been the most downloaded shopping app in Southeastern Asia. The company has made sizable inroads in Brazil, as well.
After overseeing $10 billion in gross merchandise value (GMV) traverse its e-commerce platform in all of 2018, the company oversaw $17.4 billion in GMV in just the first three months of 2022. With online ordering still in its infancy in faster-growing emerging-market countries, Sea has an opportunity to capitalize and become wildly profitable over time.