TThe prospect of some stocks in your portfolio reaching $ 1 trillion can be exciting – but some perspective is required. For example, Apple and Microsoft recently posted a market cap of $ 2.3 trillion and $ 2.1 trillion, respectively. If they were worth $ 1 trillion each, their stakes would have to be autumn about 57% and 52%, respectively.
So, to find promising breeders that could grow to $ 1 trillion in a decade or less, let’s focus on slightly smaller companies. Here are three contenders for your portfolio.
Image source: Getty Images.
Nvidia (NASDAQ: NVDA) is a major American chip manufacturer who is a pioneer in the field of computing and artificial intelligence. It’s also a strong growth stock, with stocks rising nearly 6,400% over the past decade – averaging more than 51% a year. Nvidia shares don’t have far to reach a market cap of $ 1 trillion, with the company being valued at around $ 500 billion recently.
Doubling in a decade doesn’t seem like a big deal for the company as it would only need to have average annual growth of around 7%. Note that the company had total revenue of $ 6.51 billion for the last second quarter, up 68% year over year; Gaming revenue of $ 3.06 billion, up 85%; and data center revenue of $ 2.37 billion, up 35% – all records. Nvidia dominates the gaming chip arena and has tentacles in many other arenas as well. The company spends more than $ 1 billion annually on research and development to improve its current offerings and develop new offerings, such as the GeForce NOW service, which is well suited to the growing cloud gaming industry.
With its price-to-sales and price-to-earnings (P / E) ratios, both of which are well above their five-year averages, many see the stock price as outdated. However, others find it easy to estimate the company’s worth at $ 1 trillion or more in the years to come and believe it is worth buying (or considering buying) now.
Salesforce.com (NYSE: CRM), the leading provider of customer relationship management (CRM) software, was recently valued at nearly $ 267 billion, which means that it should approximately quadruple in value over the next decade. There are no guarantees, of course, but it seems possible. Its stocks have risen more than 800% over the past decade, an average of nearly 25% annual growth.
In the final second quarter, Salesforce.com saw an impressive 23% year-over-year revenue growth (in constant currency), with CEO and Chairman Marc Benioff making the following:
Salesforce has never seen better execution or greater momentum. Our Customer 360 platform is now powered by a herd of unicorns perfectly designed for this fully digital world. Sales, Service, Marketing & Commerce, Platform, Tableau, MuleSoft, and now Slack are all billion dollar products that deliver customer success like no other company.
Note the mention of the popular workplace collaboration platform Slack – which Salesforce recently bought for $ 27.7 billion. Slack is expected to help Salesforce better serve its customers and attract new customers too.
Salesforce.com stock doesn’t look cheap even by normal standards – with a recent price-earnings ratio in the three-digit range – but here too, many investors expect the company to continue growing strongly, enough to make today’s price attractive in retrospect Spiegel a decade from there.
Image source: Getty Images.
And then there is Netflix (NASDAQ: NFLX)that needs little introduction. You may know the video entertainment streaming giant very well, but you may not know that its market value was last around $ 250 billion. Can it reach $ 1 trillion in a decade? Well, if the past is any indication, stocks have risen nearly 3,200% over the past 10 years, averaging more than 41% annually.
The past is not a foolproof indicator of future performance. When evaluating a company as a potential investment, it is always best to look to the future and estimate how much more you can reasonably expect the company to grow.
Netflix, of course, has a lot going for it: its huge subscriber base provides significant predictable revenue that the company can use to develop or acquire more content – to attract new subscribers and keep existing ones. It also views remote gaming as a new and potentially powerful source of income. This large subscriber base (around 209 million lately) is a huge competitive advantage as Netflix can build a lot of new offerings on it. Meanwhile, Netflix’s revenue rose 19% year over year in the most recent quarter, while its operating margin grew 25% faster.
Critics point to increased competition for Netflix from many directions, such as Amazon‘s Prime Video, DisneyDisney +, Apple TV +, and even Hulu alphabet‘s YouTube. You could also argue that Netflix’s stocks don’t look cheap, with a recent P / E of 61 either. But that’s well below the five-year average of 155, as proponents of the stock point out. It also coexists with a lot of rivals quite successfully.
Growth stocks are very compelling because just one or two amazing performers in your portfolio can give it a big boost. However, don’t buy them at any cost – evaluation is important. So make sure the stock appreciates in value enough over the next decade that you get a good return. And if you are unsure about a stock, you can simply add it to your watchlist or buy it gradually over time.
10 stocks we like better than Netflix
When our award-winning team of analysts have a stock tip, it can be worth listening to. After all, the newsletter that they have been publishing for over a decade, Motley Fool equity advisor, has tripled the market. *
They just revealed what they think are the top ten stocks investors can buy right now … and Netflix wasn’t one of them! That’s right – they think these 10 stocks are even better buys.
See the 10 stocks
* Equity Advisor returns on September 17, 2021
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, serves on the Board of Directors of The Motley Fool. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Selena Maranjian owns stocks of Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Microsoft, Netflix, Salesforce.com, and Walt Disney. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Microsoft, Netflix, Nvidia, Salesforce.com, and Walt Disney. The Motley Fool recommends the following options: long calls in January 2022 at $ 1,920 to Amazon, long calls in March 2023 at $ 120 to Apple, short calls in January 2022 at $ 1,940 to Amazon, and short calls in March 2023 at $ 130 to Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.