Meet the Supercharged Growth Stock That Could Join Apple, Microsoft, and Nvidia in the $3 Trillion Club by 2031

One of the most notable transitions in recent decades has been the rise of technology providers among the world’s most valuable companies. Just two decades ago, industrial and energy figures General Electric and ExxonMobil topped the list in terms of market capitalization, valued at $319 billion and $283 billion, respectively. Now, just 20 years later, technology dominates the list.

Leading the way are three of the world’s most recognized technology companies. Apple it currently tops the list at $3.4 trillion. Microsoft and Nvidia are close behind, each worth $3 trillion.

With a market cap of just $1.3 trillion, it might seem premature to suggest so Meta platforms (META -0.74%) is about to join the $3 trillion club. However, the stock has gained 163% over the past year and 495% over the past five years (as of this writing), thanks to strong operating results that should continue.

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The meta has some distinct advantages, and its ever-expanding social media empire, market dominance, and strategic adoption of artificial intelligence could determine its membership in this elite fraternity.

A steady and robust recovery

While Meta Platforms was punished during the economic downturn, the stock has rebounded strongly, propelled higher by impressive financial results. In the second quarter, revenue of $39 billion was up 22% year-over-year, while diluted earnings per share (EPS) of $5.16 were up 73%.

Financial results were driven by strong user values. The number of people visiting one of the Meta family of social media sites — which includes Facebook, Instagram, Threads and WhatsApp — grew to 3.27 billion daily, up 7 percent year-over-year.

Helping to fuel the robust results was the continued rebound in online marketing, which is improving due to gains in the general economy. Meta’s social media ecosystem hosts the company’s digital advertising.

The online advertising arena is dominated by the industry’s top two players. In 2023, AlphabetGoogle controlled about 39% of digital ad revenue worldwide, followed by Meta with 18%, according to data compiled by business intelligence platform Statista.

As the second largest digital advertiser in the world, Meta Platforms is well positioned to reap the benefits of the comeback, which could be substantial.

Multiple engines of growth

Global ad spending is expected to grow 8% to more than $1 trillion in 2024, according to ad industry researcher WARC Media. Social media is expected to be the fastest-growing medium in digital advertising, capturing nearly 22 percent of total ad spending, according to the report. He goes on to say that the Meta is “on track for outsized gains in the coming months.”

Beyond the hype, however, is Meta’s strategy to take advantage of the windfall of artificial intelligence (AI). The company has leveraged the data it captures from the billions of users on its social platforms to develop its own state-of-the-art large language models that form the foundation of generative AI.

The result is Llama (Large Language Model Meta AI), which powers its flagship Meta AI chatbot. Earlier this year, the company unveiled Llama 3, declaring Meta AI to be “one of the world’s leading AI assistants.” The company has made this system free for individual users (collecting even more data), while charging the largest cloud infrastructure providers for the privilege of including it in their offerings.

While there’s a lot of focus on AI, it’s not the only growth engine that could push the Meta higher. Meta’s Reality Labs — home to its Oculus virtual reality (VR) business, its Quest VR headset and its ever-evolving metaverse plan — has had little to show for its efforts so far. However, CEO Mark Zuckerberg is confident that these investments will pay off, ultimately increasing Meta’s profits.

Given the rebounding ad market, multiple growth drivers, and tailwinds driving generative AI, it shouldn’t take long for Meta Platforms to earn membership in the $3 trillion club.

The Path to $3 Trillion

Meta currently boasts a market cap of around $1.35 trillion, which means it will need share price gains of around 123% to take its value to $3 trillion. According to Wall Street, Meta is expected to generate revenues of $161.6 billion in 2024, giving it a forward price-to-sales (P/S) ratio of about 8.3. Assuming its P/S remains constant, the Meta would need to grow its revenue to around $360 billion annually to support a $3 trillion market cap.

Wall Street is currently forecasting revenue growth for Meta of 14% annually over the next five years. If the company hits that benchmark, it TO hitting a $3 trillion market cap just after 2031. It’s worth noting that Meta has grown its annual revenue by nearly 1,000% over the past decade, so these expectations may be conservative.

Additionally, at 27 times earnings, the Meta is selling at a discount compared to a multiple of 29 for S&P 500. That’s an attractive price to pay for a company with dominant market share, strong momentum and multiple ways to win.