Palantir Technologies (PLTR 1.22%) stock has advanced 450% in the past year, and its $330 billion market value makes its one of the 30 most valuable public companies in the world. But I think AppLovin (APP -4.52%) and MercadoLibre (MELI 0.48%) can top that figure in four years or less.
Here's what that would mean for shareholders:
- AppLovin is worth $117 billion. The stock must increase 183% for its market value to hit $331 billion.
- MercadoLibre is worth $122 billion. The stock must increase 171% for its market value to hit $331 billion.
Importantly, both stocks have topped those thresholds in the past. In the last three years, AppLovin and MercadoLibre shares advanced 925% and 275%, respectively. But these monster growth stocks can keep climbing higher. Here's why.
Image source: Getty Images.
AppLovin could top Palantir's current market value in three years
AppLovin develops adtech software that helps developers market and monetize their applications across mobile and connected TV campaigns. Most advertising on its platform has traditionally focused on video games, but the company is attracting a broader variety of brands with its new e-commerce advertising product.
AppLovin put a great deal of effort into building its Axon recommendation engine. It began acquiring game studios years ago to train the underlying machine learning models that optimize targeting, and the company has since released two major updates. The end result? Axon is superior to other campaign targeting engines as measured by return on ad spend, according to Morgan Stanley.
AppLovin reported excellent first-quarter financial results. Total revenue increased 40% to $1.4 billion, as strong sales growth in the advertising segment offset a decline in the mobile games segment. Meanwhile, generally accepted accounting principles (GAAP) earnings climbed 149% to $1.67 per diluted share. And management guided for 69% advertising sales growth in the second quarter.
Importantly, CEO Adam Foroughi recently discussed the success of its new e-commerce advertising product. He told analysts, "This opens up a massive opportunity, as there are over 10 million businesses who advertise online that could eventually use our platform profitably. By delivering incremental value, we position ourselves as an engine for growth."
Wall Street expects AppLovin's earnings to increase at 49% annually over the next three to five years. That makes the current valuation of 62 times earnings look reasonable. Also, if the company maintains that pace for three years, its market value can hit $331 billion, while its price-to-earnings multiple falls to 54.
AppLovin has carved out a strong presence in the adtech space due to its Axon recommendation engine. The company could surpass Palantir's current market value within three years, so patient investors should consider purchasing a small position in this monster growth stock today.
MercadoLibre could top Palantir's current market value in four years
MercadoLibre operates the largest online marketplace in Latin America. The company has consistently gained market share during the last three years, and that trend is expected to continue. One reason for that success is a network effect, whereby the platform becomes increasingly attractive to shoppers as more sellers list products, and increasingly attractive to sellers as more shoppers participate.
MercadoLibre has reinforced and accelerated that network effect with adjacent solutions for fulfillment, advertising, financing, and payments. The company has built the fastest and most extensive delivery network in Latin America. It is the largest retail media advertiser in the region. And it owns the largest fintech platform in Argentina, Chile, and Mexico, and the second-largest in Brazil.
MercadoLibre reported strong financial results in the first quarter. Revenue jumped 37% to $5.9 billion on especially strong sales growth in the fintech segment, which itself was due to adoption of credit cards, financing, and asset management products. Meanwhile, profit margin improved modestly, and GAAP net income increased 44% to $9.74 per diluted share.
Wall Street estimates MercadoLibre's earnings will increase at 30% annually over the next three to five years. That makes the current valuation of 59 times earnings look reasonable. And if the company maintains that growth rate during the next four years, its market value can hit $331 billion, while its price-to-earnings multiple falls to 57.
MercadoLibre enjoys a strong position in multiple growing markets, and the company could exceed what Palantir is worth today within four years. Regardless, patient investors should feel good about buying a few shares today.
