Last week, the benchmark S&P 500 did what it’s been doing throughout much of 2021: It galloped to another record close. But the broad-based index isn’t the only thing on Wall Street hitting rarified air.
Recently, Tesla Motors joined Apple, Microsoft, Alphabet, Amazon, and Meta Platforms, the parent company of Facebook, in reaching the psychologically important $1 trillion valuation mark. There’s little doubt that, as global economies grow over time and businesses innovate, we’ll see new additions to the trillion-dollar club.
In fact, the following four supercharged growth stocks all have the potential to be worth $1 billion in 15 years, if not sooner.
The largest growth stock on this list by market cap is payment facilitator Mastercard (NYSE:MA), which is effectively a tripling in its share price away from hitting a $1 trillion valuation. If investors give Mastercard 10 to 15 years, they should get that tripling in market cap.
The great thing about payment processors like Mastercard is they benefit from long-winded periods of expansion. Even though recessions are an inevitable part of the economic cycle, they usually only last for a couple of months to a few quarters. By comparison, expansions often last for years. This gives Mastercard plenty of time to reap the rewards of higher corporate and consumer spending.
Another key to Mastercard’s growth story is its avoidance of lending. You’d think with the U.S. and global economy enjoying such long periods of economic expansion that Mastercard would want to generate fee and interest income. However, when recessions arise, lenders are forced to backpedal by setting aside capital to cover delinquent loans. With no loans outstanding, Mastercard is better positioned to navigate economic downturns. Avoiding lending is what’s helped push its profit margin consistently above 40%.
With ample opportunity to expand its payment infrastructure to underbanked emerging markets, Mastercard’s growth rate should remain robust throughout the decade, if not well beyond.
Cloud-based customer relationship management (CRM) software provider Salesforce.com (NYSE:CRM) also has the tools necessary to grow from its current $297 billion market cap to $1 trillion within 15 years.
For those unfamiliar with CRM software, it’s used by consumer-facing businesses to enhance client relationships and bolster sales. Beyond just logging/accessing real-time info, it can be used to manage online marketing campaigns, oversee product or service issues, and most importantly run predictive sales analyses on an existing client base.
What makes Salesforce special is its role as CRM kingpin. According to IDC, Salesforce brought in 19.5% of global CRM software spending in 2020, which was over a percentage point higher than No.’s 2 through 5 in market share… combined! CRM software is finding use in new sectors (e.g., financial, industrial, and healthcare) and offers sustainable double-digit growth potential for the foreseeable future.
Also lifting Salesforce is CEO Marc Benioff’s prudent acquisitions. Acquiring MuleSoft, Tableau, and more recently Slack Technologies, has expanded the Salesforce ecosystem, made its services more accessible to small and medium-sized businesses, and given the company added platforms to cross-sell its high-margin services.
Trillion-dollar valuations can emerge from overseas markets as well. Despite already enjoying a mammoth run up since the pandemic began, Singapore-based Sea Limited (NYSE:SE) can be worth $1 trillion by or before 2036.
As I’ve previously pointed out, Sea’s success is a function of having not one or two, but three rapidly growing segments. For the time being, its gaming division is the only one generating positive earnings before interest, taxes, depreciation, and amortization (EBITDA). In the June-ended quarter, Sea had roughly 725 million quarterly active mobile gamers, 12.7% of which were paying to play. This pay-to-play conversion rate is multiple times higher than the industry average.
The company’s nascent digital financial services segment is seeing strong growth, too. Almost 33 million people paid for digital wallet services in the second quarter. Since many of the regions Sea targets are underbanked, mobile wallets could be a key tool to democratizing access to basic banking services.
But the most exciting segment is e-commerce. Shopee is the most-downloaded shopping app in Southeastern Asia, with gross orders rising 127% to 1.4 billion in the second quarter. In terms of gross merchandise value (GMV) transacted, Shopee’s annual run-rate is now $60 billion, up from $10 billion in GMV for all of 2018.
A fourth supercharged growth stock expected to make a run at a $1 trillion valuation in 15 years or less is stay-and-hosting platform Airbnb (NASDAQ:ABNB). With a market cap of $109 billion, Airbnb has the most work to do of any company on this list.
However, Airbnb also brings the most disruptive capacity to the table of any company mentioned here. It has a network of more than 4 million hosts on its platform providing generally cheaper, convenient, and more secure stay options than traditional hotels. Listings should increase considerably over time as homeowners become aware of the cash flow potential of putting their property on Airbnb’s platform. Prior to the pandemic, bookings went up fivefold in just three years.
Interestingly, the company’s fastest-growing category is long-term stays, which are defined as bookings of 28 or more days. As workforces become more remote in the wake of the pandemic, Airbnb could be a big beneficiary of workers no longer being tethered to a single location.
The company is also making waves with its Experiences segment. Experiences partners with local experts to take travelers on adventures. This represents one of the many steps Airbnb can take to generate add-on revenue beyond just hosting.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.