There are only 10 U.S.-listed stocks trading at market caps north of a trillion dollars -- for now. It's an exclusive club, but it's also one with an open door. Who will be the next entry into the Trillion-Dollar Market Cap Club?
I have some ideas. I believe that Alibaba Group (BABA +6.96%), Walmart (WMT 0.52%), and Netflix (NFLX +0.34%) have the potential to join the handful of stocks with 13-figure market caps next year. Some roads will be longer than others, but I think all three have the potential to get there in 2026.
Image source: Getty Images.
1. Alibaba
NYSE: BABA
Key Data Points
China's e-commerce pioneer faces the longest odds among the three names on this list. With a market cap of $389 billion, Alibaba would have to soar 157% at some point in the next 14 months to get to a cool $1 trillion. It might seem like a lofty goal, but check the chart. Alibaba has already doubled so far this year.
I will get to the valuation argument -- yes, for a stock that has already soared 105% this year -- shortly. I want to first tackle the business itself. Alibaba is a treasure trove of a company. Its flagship business consists of its business-to-consumer e-commerce hub Tmall and China's leading consumer-to-consumer marketplace Taobao. The two digital retailing platforms combined to deliver 45% of Alibaba's consolidated revenue, but more than 100% of its consolidated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
Tmall and Taobao are highly profitable, combining to generate an adjusted EBITDA margin of 44% in its most recent quarter. If these two businesses that make up less than half of its revenue account for more than all of its profit, what accounts for the other 55% of its business? Alibaba is able to invest in video streaming, food delivery apps, and even fill the void of China's need for artificial intelligence chips in a new normal of trade restrictions with U.S. providers. It also has a thriving cloud-hosting business that is generating adjusted EBITDA.
Let's circle back to valuation. Alibaba is cheaper than you probably think. Despite being the second most valuable company by market cap to more than double this year, Alibaba is trading for less than 18 times next year's earnings. By the time we close in on the end of next year, Alibaba's forward earnings multiple will be a mere 14.
If you need another catalyst, let's talk about accelerating growth. This should be Alibaba's fourth consecutive year of single-digit revenue growth, but analysts see Alibaba coming through with double-digit top-line growth next year. The bottom line should appreciate even faster. The race is afoot.
2. Walmart
NASDAQ: WMT
Key Data Points
I'm swinging for the fences with Alibaba having to more than double to break into the Trillion-Dollar Market Cap Club. I think I'm entitled to a bunt single. The stock with the largest capitalization under $1 trillion is Walmart. Shares of the leading mass market retailer are worth $853 billion. Walmart investors only have to see their stock climb 17% between now and the end of next year to get there.
Walmart serves roughly 270 million customers and warehouse club members daily through its more than 10,750 stores worldwide. It uses its knack for turning over merchandise quickly and its girth to cash in on scalability. Customers know they will get a good deal at a Walmart or a Sam's Club.
You can teach an old retailer some new tech tricks. E-commerce sales at both concepts rose 26% in its latest quarter. Embracing other digital and connected TV initiatives, its global advertising business shot 46% higher in this summer's fiscal second quarter. The stock may not seem cheap at 40 times trailing earnings, but it's a recession-tested concept that finds a way to keep the registers going in good times and bad.
3. Netflix
NASDAQ: NFLX
Key Data Points
Finally we have Netflix, with a chill $526 billion market cap. It would have to almost double -- rising 90% -- to join the 13-figure club. Thankfully, it has momentum in its favor. The provider of the world's leading premium streaming service has seen its shares rise nearly 70% over the past year.
Netflix should be on the move later this week. It reports quarterly results on Wednesday afternoon, and there are a few things that can go right for Netflix. From a potential stock split to the inevitable price hike, this is a company that knows when to test its pricing elasticity. Content is king, and the top dog in premium streaming has no reason to think it's going to bequeath the throne anytime soon.
