There has been a remarkable shift in recent decades that has seen tech companies rise to become the most valuable companies in the world. Twenty years ago, industrial and energy whistleblowers General Electric And ExxonMobil measured by market capitalization, the country reigned supreme, valued at $319 billion and $283 billion respectively. Now, just twenty years later, some of the best-known names in technology are at the top.
Leading the charge are three of the most well-known companies in the world today. All are leaders in technology and need no introduction. Apple currently tops the list at $3.5 trillion, with the stock recently hitting new all-time highs. Nvidia also recorded a new record this week and improved Microsoftas the two now have a market value of $3.4 trillion and $3 trillion respectively.
With a market cap of $1.4 trillion, it might seem presumptuous to suggest that Metaplatforms (NASDAQ: META) has all the hallmarks of a $3 trillion club member. However, the stock has done well, gaining 80% in the past year and 694% in the past 10 years (at the time of writing), and the winning streak looks set to continue.
The company’s consistent growth of its social media platform, continued strength in digital advertising, and brilliant strategy for leveraging artificial intelligence (AI) should combine to ensure Meta can take its place in this exclusive society.
A rebound for the ages
It is undeniable that Meta Platforms has suffered from the economic crisis. Yet the mark of a resilient business is its ability to recover, and the evidence of that recovery is undeniable. In the second quarter, Meta delivered revenues that rose 22% year over year to $39 billion, driving diluted earnings per share (EPS) up 73% to $5.16.
The driving force behind its success is the company’s reliable user growth. The number of users visiting one of Meta’s family of social media platforms – including Facebook, Instagram, Threads, Messenger and WhatsApp – grew 7% year over year to 3.27 billion.
These billions of daily users are the captive audience for digital advertising, an industry that has rebounded strongly since the economic downturn. Meta is part of a duopoly in the field of online marketing. AlphabetGoogle captured an estimated 39% of the global digital advertising market, with Meta taking second place with 18%, according to data collected by business intelligence platform Statista.
The online marketing is inextricably intertwined with the social media empire and contributes to Meta’s continued success.
Multiple ways to win
According to advertising industry researcher WARC Media, global advertising is expected to grow by about 8% and reach more than $1 trillion this year. Social media is predicted to be the fastest growing segment in digital advertising, growing to 22% of total ad spend, according to data. Meta features prominently in the report, which states that Meta is “on track to post big gains in the coming months.” As one of the largest players in the adtech industry, Meta will benefit from the continued recovery.
Beyond advertising, Meta has taken a number of strategically important steps to capitalize on the accelerated adoption of artificial intelligence (AI). With billions of daily visitors to social media, the company has mined its vast trove of data to create a range of high-quality language models, which form the basis for generative AI.
The fruit of this work is LLaMA (Large Language Model Meta AI), the AI system that fuels the Meta AI chatbot. The latest version – LLaMA 3 – is “one of the world’s leading AI assistants,” according to the company. By making LLaMA open source, Meta hopes to drive adoption, which will lead to even more data to leverage. While Meta AI is free for individual users, the company charges companies and cloud infrastructure providers, who sell it on their cloud platforms.
While AI is grabbing all the headlines, there are other possible ways Meta could win. The company has invested heavily in Meta’s Reality Labs, which housed its Oculus virtual reality (VR) business, Quest VR headsets, and its ambitions for the metaverse. While these are little more than sideline activities at this point, CEO Mark Zuckerberg believes they will be critical to Meta’s future growth and ultimately the bottom line.
With the trifecta of a recovery in digital advertising, the opportunity presented by generative AI and its other initiatives, it’s not hard to imagine a path for Meta Platforms to make its way into the $3 trillion club .
The road to $3 trillion
Meta has a market cap of about $1.46 trillion (as of market close on October 17), so it will need price gains of about 105% to increase its value to $3 trillion. According to Wall Street, Meta is expected to generate revenues of $161.9 billion in 2024, giving the stock a price-to-sales ratio (P/S) of 9. Assuming P/S remains constant, Meta would need revenue of approximately $332 billion annually to support a market cap of $3 trillion.
Wall Street currently predicts growth of almost 14% per year for Meta over the next five years. If the company achieves that goal, it will could reaching a market capitalization of $3 trillion as early as 2030. It’s worth noting that Meta has grown its annual revenue by more than 900% over the past decade, so those estimates could be conservative.
Moreover, at 29 times earnings, Meta is selling at a discount, compared to a multiple of 30 for the S&P500 — yet boasts gains of 694% over the past decade, far more than the 214% gain for the S&P 500. That illustrates why Meta Platforms is worth every penny, especially as it pursues multiple paths to success.
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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Danny Vena has positions at Alphabet, Apple, Meta Platforms, Microsoft and Nvidia. The Motley Fool holds positions in and recommends Alphabet, Apple, Meta Platforms, Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Meet the unstoppable growth stocks that could join Apple, Nvidia and Microsoft in the $3 Trillion Club by 2030. was originally published by The Motley Fool
