A trillion-dollar stock is still rare even as companies grow bigger, doing tens to hundreds of billions of dollars in sales. Such a rare milestone means that any company hitting it will probably be one of the world's most dominant companies, making it a potential goldmine for long-term investment returns.
Here are three companies with the ingredients to eventually becoming trillion-dollar stocks, making them worth considering for any long-term growth investor.
A seemingly inevitable trillion-dollar stock
Electric vehicle leader Tesla (TSLA 1.85%) got tossed from the trillion-dollar club this past year. Some might argue that the publicity around Elon Musk's Twitter purchase hurt shares, while others will point to the bear market and recession fears. Either way, Tesla's absence from the club seems temporary. The company still dominates the electric vehicle market; its models took four of the top six spots in units sold in 2022. The top-selling Model Y sold over 191K units; the best non-Tesla model (Mustang Mach-E) came in at just 28K units.
Tesla's growth days are probably far from over; analysts estimate that earnings per share (EPS) will grow by an average of 28% annually over the next several years. Suppose Tesla grows earnings even at a 15% rate for the next decade. After all, Tesla's growth should be aided by the freshly launched Tesla Semi and the upcoming Cybertruck, so this might be conservative.
TSLA Market Cap data by YCharts
Tesla's estimated 2022 EPS is $4.01, on average, so if we do the math, its 2032 earnings would be about $16.22 per share. To help add more margin for error, I will assume that Tesla's P/E ratio settles at just 35 over the long term. That creates a 2032 share price of $568.
Multiplying by Tesla's current outstanding shares (3.15 billion) would put the stock at a market cap of $1.78 trillion. That should put Tesla over the trillion-dollar valuation well before the end of the decade; if these numbers prove conservative, Tesla's stock could regain trillion-dollar status much faster.
The comeback story
You probably wouldn't know it from its current $359 billion market capitalization, but social media giant Meta Platforms (META 2.98%) briefly joined the trillion-dollar club in 2021. Since then, Meta has faced a struggling advertising business and scrutiny over the company's colossal spending on metaverse division Reality Labs.
The negative sentiment in this bear market crushed the stock, which now sits 64% below its high.
Analysts believe that Meta's EPS will grow by an average of 8% annually over the next three to five years. Remember that Meta's heavy investments into Reality Labs negatively impact the bottom line since the segment is nowhere near profitable. Hypothetically, the company could average 10% earnings growth over the next 10 years if Meta's metaverse bets start paying off.
META Market Cap data by YCharts
Meta's estimated 2022 EPS is $8.95, so projecting out 10 years at 10% annual growth would put 2032 EPS at $23.21. Let's assume that the valuation doesn't entirely return to its long-term price-to-earnings ratio (P/E) of 25. Instead, we'll use a P/E of 20 to give our math some margin for error.
Meta's resulting share price would be $464 in 2032; multiplying it by the current outstanding shares (2.65 billion) creates a $1.2 trillion market cap. A lot has to go right for Meta, but it's pretty easy to see a realistic scenario where the stock reaches a trillion-dollar value in the next six to 10 years.
Here's a dark horse contender
Software plays a more significant role in our economy than ever; Snowflake (SNOW 2.69%) is a rapid-growth software company that helps enterprises store, manage, and analyze their data. Investor frenzy pushed the stock's market cap past $122 billion even though the company was doing just $1 billion in revenue. After the stock's 2022 stumble, it now trades at a $45 billion valuation.
How ample is the growth opportunity for Snowflake? The company believes its market will grow to $248 billion by 2026, and management has stated that its revenue goal is $10 billion by its 2029 fiscal year. You can use the price-to-sales ratio (P/S) to value the stock because Snowflake's growing so fast that predicting profits is even more challenging.
SNOW Market Cap data by YCharts
It's unrealistic to expect Snowflake to maintain the eye-popping valuations it saw in 2021, which maxed out at a P/S multiple of 183! The stock's downfall makes it clear that Wall Street got caught up in the hype and excitement. If Snowflake does $15 billion in revenue by 2032, it will take a P/S ratio of 67 to push the stock past a $1 trillion market capitalization.
The makes it the least likely stock on this list to hit a $1 trillion valuation. However, the long-term projections could be conservative and not factor in potential acquisitions or new products. Even if Snowflake can't grow enough to hit $1 trillion in a decade, the stock can be an excellent investment from these prices if it keeps growing at its current rate.
