In 2018, Apple became the first publicly traded company to reach a $1 trillion market capitalization. Several more have joined that club since, but it remains highly exclusive, with fewer than 10 members among the thousands of stocks trading on equity markets. The good news for investors is that more companies will also reach this milestone eventually, producing excellent returns along the way.
Let's discuss two stocks that could get there within five years: Eli Lilly (LLY -0.46%) and Netflix (NFLX 0.12%).
Redefining the meaning of a blockbuster
Eli Lilly could become the leading pharmaceutical company in terms of sales by 2030, a feat it is well-positioned to achieve thanks to its GLP-1 lineup. The company's tirzepatide, marketed under the brand names Mounjaro and Zepbound for diabetes and weight management, respectively, is breaking records. First approved in 2022, tirzepatide is on track to generate well over $20 billion in sales this year.
Image source: Getty Images.
Most medicines in the industry never become blockbusters. Most that do have to wait years after their launch before that milestone. Tirzepatide is a different animal altogether, and according to some projections, it is on track to generate $62 billion in sales by 2030, annual sales never before seen in the industry for a single compound. Not even Comirnaty, a vaccine that helped curb a global pandemic, hit that number at its peak.
This means that the pace at which Eli Lilly has been growing its top line lately should be the norm for the company over the next five years. In the second quarter, the drugmaker's revenue increased by 38% year over year (an exceptional number for a pharmaceutical giant) to $15.6 billion.
Then there's the rest of Eli Lilly's lineup and the many pipeline candidates across diabetes, obesity, oncology, pain, and other areas that the company boasts. Add to all that Eli Lilly's solid dividend program with rapidly growing payouts -- they have more than doubled over the past five years -- and you've got an excellent stock to hold for the next half a decade and beyond. Eli Lilly's market cap is currently $660 billion. It needs a compound annual growth rate (CAGR) of 8.67% to hit a $1 trillion valuation by 2030.
The company's revenue and earnings should grow much faster than that through the end of the decade and allow it to join this highly exclusive club.
Changing the way we watch TV
The cord-cutting trend is in full swing, largely thanks to Netflix's efforts. Cable is slowly being phased out, but it's not time to say its eulogy yet. Older generations who grew up with cable are keeping it alive, meaning there is still massive whitespace for Netflix to bring viewing hours into its ecosystem. The company estimated a revenue opportunity of more than $650 billion, which dwarfs its trailing 12-month sales of $41.5 billion.
True, the streaming landscape has evolved, with significantly more competition now. Some thought Netflix wouldn't survive the shift. But since 2019, when major corporations, including Apple and Walt Disney, launched competing platforms, Netflix has performed extremely well.
We can credit Netflix's management for adapting to the new landscape. It launched a low-price ad-supported tier and cracked down on password sharing. The company also continues to increase prices without losing a significant market share, a testament to its incredible brand loyalty. Furthermore, Netflix's extensive ecosystem enables it to create new, original, high-quality content tailored to the preferences of its viewers.
In my view, the next five years could resemble the past for Netflix. Though revenue isn't growing as fast as it was, earnings and free cash flow have soared.
NFLX Revenue (Quarterly) data by YCharts.
Expect that trend to continue through the end of the decade as the streaming giant makes more headway into its large untapped market. Netflix's current market cap of $520 billion means it needs a CAGR of about 14% in the next five years to become a trillion-dollar stock. That's a difficult thing to achieve, but Netflix could pull it off. Even if it doesn't quite get there, Netflix is a terrific stock to own well beyond the next five years.
