On Wall Street, there's nothing more exclusive than the trillion-dollar club. These are U.S. stocks that have achieved and maintained market capitalizations of $1 trillion or more. Currently, there are just five of these stocks:
- Apple: The ubiquitous seller of smartphones and other consumer tech devices
- Microsoft: The enterprise software kingpin
- Alphabet: The owner of Google and YouTube
- Amazon: The leader in e-commerce and cloud infrastructure
- Nvidia: The leader in graphics processing units and chips used for artificial intelligence (AI)
While it's not easy to grow a company to a valuation of $1 trillion or greater, there's always the possibility that more new companies will join the club -- and three, in particular, could be knocking on the door in 2024. I'm talking about Meta Platforms (META 0.43%), Tesla (TSLA -1.11%), and Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%). Here's what it would take for each to get there.
Image source: Getty Images.
1. Meta Platforms: More than social media
Meta Platforms has been the comeback stock of the year, with shares of the Facebook parent more than tripling from their low in 2022. During its "Year of Efficiency," the company has cut costs through layoffs and office closures, driven profitability as new products like Reels start to mature, and benefited from the broader recovery in digital advertising, which has led its growth rate to accelerate over the year.
Meta currently has a market cap of $822 billion, meaning the stock price would have to increase by 22% next year to roughly $400 a share, assuming that its share count held steady. Considering the stock has more than doubled this year and its valuation is reasonable, that milestone is well within the company's reach.
In fact, Meta was already once a trillion-dollar company for a brief period in 2021, though it lost that status in the tech stock crash in 2022 as investors balked at its metaverse strategy when it invested heavily in its Reality Labs segment.
To get to the trillion-dollar mark again, any number of things could push Meta there. It launched its Quest 3 mixed-reality headset in October, and while early sales seem to be sluggish, strong sales during the holiday season would delight investors, showing that Reality Labs may not be a boondoggle after all. Additionally, progress in AI and cost controls in Reality Labs would help boost the stock, as would continued strength from its advertising business.
The analyst consensus currently calls for Meta to reach $17.39 in earnings per share. At a share price of $400, that would give the stock a price-to-earnings ratio of 23, which seems like a reasonable expectation if the company executes as promised.
2. Tesla: Pioneering EVs and building in AI
Tesla stock has also been a top performer this year, even as the underlying business has mostly struggled. Revenue growth has slowed, coming in at just 9% in the third quarter, and just 5% in automotive revenue growth. Profits are also falling, as margins have compressed while the company cuts prices to gain market share so its vehicles remain affordable to consumers who are struggling with rising interest rates.
Even as the business is facing headwinds, the stock has soared this year because Tesla is regarded as one of the leaders in AI. Its full self-driving technology has been in beta for years; Tesla is expected to eventually build a "robotaxi" that will ferry passengers in a specially designed driverless Tesla vehicle, and it's working on Optimus, the bipedal autonomous robot that can now do yoga, according to CEO Elon Musk.
Heading into 2024, the EV market appears to be weakening. Several other EV makers have cut back on production, and Musk has complained of softening demand and other challenges, due in part to high interest rates.
At a current market capitalization of $750 billion, Tesla stock would have to gain 33% next year to join the trillion-dollar club once again. (Like Meta, it was also briefly a member). Considering the weakness in the EV market, EV sales alone seem unlikely to get it there, but a breakthrough in AI could put it over the top, and potentially strong sales of the new Cybertruck could as well.
Tesla stock has a long history of volatility, so investors should expect the stock to swing next year, and it could easily go lower if EV prices keep falling.
3. Berkshire Hathaway: The empire that Buffett built
Unlike Meta or Tesla, Berkshire Hathaway is not a tech stock. Though its biggest stock holding is Apple, the bulk of the company's wholly owned subsidiaries are focused around insurance companies like GEICO, its BNSF railroad, and energy and utilities.
That recipe, combined with CEO Warren Buffett's eye for long-term value, has brought investors tremendous success, but it also means that Berkshire won't likely ever achieve the eye-popping growth that tech companies like the Magnificent Seven, which include the trillion-dollar club members, are capable of delivering.
Still, Berkshire currently has a market cap of $776 billion, meaning it's within striking distance of the trillion-dollar mark. To get there, its share price would have to increase by 29%, assuming that shares outstanding stay flat.
Since Berkshire is a conglomerate of diversified businesses, there's no single factor that would get it there. Instead, the most important input is the company's earnings multiple, which tends to expand in bull markets. If stocks rally in 2024, Berkshire is likely to follow suit, as a number of its businesses, like BNSF, are dependent on cyclical economic growth.
It certainly wouldn't be unheard of for Berkshire to gain 29% in a single year. The stock has done that 22 times in its history, most recently in 2021. If Berkshire doesn't get there next year, it will likely join the trillion-dollar club in the next few years.
