Meet the Unstoppable Growth Stock Set to Join the $3 Trillion Club by 2030

In recent years, technology companies have seen remarkable success, moving to the forefront of global market value. Just 20 years ago, companies like General Electric and ExxonMobil dominated the market caps at $319 billion and $283 billion, respectively. Fast forward to today, and tech giants such as Apple, Nvidia, and Microsoft are leading the pack.

Apple currently holds the top spot with a market cap of $3.5 trillion. Following closely, Nvidia and Microsoft boast market values of $3.4 trillion and $3 trillion, respectively. Given its current valuation of around $1.4 trillion, it might seem ambitious to predict that Meta Platforms (META) could join this elite group by 2030. Still, with an eighty percent stock gain over the past year and a staggering six hundred ninety-four percent increase over the last decade, there is potential for continued growth.

Meta's success can primarily be attributed to its robust social media platforms, a thriving digital advertising segment, and a strategic focus on artificial intelligence (AI).

A Remarkable Recovery

Meta experienced challenges during the economic downturn, but its recovery has been marked by impressive growth. In the second quarter, Meta reported a 22% increase in year-over-year revenue, reaching $39 billion, which in turn spurred a 73% increase in diluted earnings per share (EPS) to $5.16.

Key to this success is the growing user base of Meta’s social media platforms, which includes Facebook, Instagram, Threads, Messenger, and WhatsApp. The total number of users rose 7% year-over-year, totaling 3.27 billion active users. These users create a solid foundation for Meta in the digital advertising market, which has rebounded strongly since the economic slump.

Meta stands as a key player in the online advertising arena, which is largely dominated by a duopoly with Alphabet's Google, capturing about 39% of the global digital ad market compared to Meta's 18%, according to Statista.

Multiple Paths to Profits

The global advertising market is projected to grow by approximately 8% this year, reach beyond $1 trillion, with social media expected to be the fastest-growing segment. Reports indicate that Meta is well-positioned to capture significant gains in this environment.

Beyond advertising, Meta has made strategic investments in artificial intelligence. By leveraging its vast repository of user data, the company has developed top-tier language models, which support its generative AI efforts, including systems like LLaMA (Large Language Model Meta AI). The recent version, LLaMA 3, is marketed as "one of the world’s leading AI assistants." Meta has opted to make LLaMA open-source to foster widespread adoption, fueling further growth in data and revenue from enterprise customers.

In addition to AI, Meta is investing in Reality Labs, focusing on virtual reality with products like Oculus and the Quest VR headsets, aiming to tap into the future metaverse market. Though still developing, CEO Mark Zuckerberg envisions these initiatives as integral to Meta's ongoing growth.

Considering the recovery of digital advertising, opportunities in generative AI, and other innovative ventures, there is a compelling case for Meta Platforms to reach the $3 trillion milestone.

The Path to $3 Trillion

Currently valued at around $1.46 trillion, Meta would need to see its stock price increase by about 105% to attain a $3 trillion market cap. Analysts anticipate revenue of approximately $161.9 billion for 2024, suggesting a forward price-to-sales (P/S) ratio of 9. For Meta to support a $3 trillion valuation, its annual revenue would need to be around $332 billion.

Wall Street projects Meta’s revenue to grow by nearly 14% annually over the next five years, positioning the company to possibly achieve a $3 trillion market cap as soon as 2030. Considering Meta's record of growing annual revenue by over 900% in the past decade, these growth estimates may be conservative.

Moreover, Meta is currently valued at 29 times earnings, a competitive rate compared to the 30 times earnings for the S&P 500. With a 694% stock price increase over the last ten years, greatly surpassing the S&P 500's 214% increase, it underscores Meta's robust worth as it pursues various growth avenues.

Disclosure: Some individuals mentioned may hold positions in various companies, including Meta, and the author has positions in Meta and its affiliates.

Growth, Technology, Investing