Four point club: predicting the next company to join the trillion dollar elite
NEW YORK (Reuters) – The trillion-dollar market capitalization club expanded to include a third U.S. company last week, along with Google parent company Alphabet Inc. GOOGL.O surpassing the high valuation mark. Adding the next member, however, is likely to take some time.
Apple Inc AAPL.O and Microsoft Corp MSFT.O are also worth more than $ 1,000 billion on the stock market. And while Amazon.com Inc AMZN.O Currently worth around $ 935 billion, the e-commerce leader briefly crossed the trillion dollar threshold in September 2018.
The next closest company is no less than $ 300 billion from the brand, but a handful of companies could compete based on their current values.
Social media platform Facebook Inc FB.O seems to have pole position. Its market value of $ 630 billion is about $ 65 billion higher than that of Berkshire Hathaway Inc. BRKa.N, the next richest company in the S&P 500 .SPX.
But a lot can happen between now and $ 1 trillion, and investors urged to cripple the pitch have revealed different choices among the S&P 500 .SPX for which the American company will be the fifth member of the elite club. The next one to join may also not be on anyone’s list yet.
Chart: Market cap heavyweights (interactive)
Chart: market heavyweights
The following are among the top contenders to break the $ 1 trillion mark in market valuation:
FACEBOOK (current market cap: $ 627 billion)
The social media company’s share price has climbed around 50% over the past year, and while past performance is not a predictor, Facebook is said to exceed $ 1,000 billion in just over $ 1 trillion. of a year if it maintains this rhythm.
To get there, Facebook “must demonstrate its ability to monetize its user base beyond just selling ads,” King Lip, chief strategist at Baker Avenue Wealth Management, said in an email.
Closer scrutiny by tech companies on privacy and data policies could limit the growth and valuation of Facebook shares, investors say.
Facebook is poised to grow above the market, said Margaret Reid, senior portfolio manager at The Private Bank at Union Bank. But “this trillion dollar market capitalization could be further off the spectrum due to the regulatory environment of these technology platform companies,” she added.
BERKSHIRE HATHAWAY ($ 561 billion)
Shares of Warren Buffett’s conglomerate have climbed more slowly than the overall market in recent years, with its Class A shares up 11% in 2019 against a gain of almost 29% for the S&P 500.
Berkshire’s “growth rate is less exciting, their valuation is less likely to increase significantly,” according to emailed comments from Jason Ware, chief investment officer at Albion Financial Group, who called the power beneficiary and the economic competitive advantages of the diversified company of “hermetic”.
“They’ll probably end up with $ 1 trillion in the end, but they’re the turtle in this story.”
VISA ($ 446 billion)
Soaring stock prices propelled Visa Inc VN and rival payment processor Mastercard Inc MAN the market capitalization graph.
Both could overtake Facebook in market value three years from now, if all three companies maintain their average annual share price increases of the past three years.
With Visa stocks trading at over 30 times 12-month earnings estimates and above their 10-year average market premium, Refinitiv Datastream says some investors are wary of its valuation.
Albion’s Ware said Visa’s dominance in the credit and debit markets “has provided them with highly visible recurring income and profits and therefore a stable market premium.”
If Visa’s P / E ratio remains stable or increases, Ware said, the company could reach $ 1,000 billion “before many expect it.”
JP MORGAN ($ 428 billion)
JP Morgan Chase & Co JPM.N ranks as the largest US bank by market value with over $ 100 billion. Paul Nolte, portfolio manager at Kingsview Investment Management, said in an email that the bank could get even bigger.
“There will be legislative issues with a really big JP Morgan,” Nolte said. “But continued consolidation within the banking industry as well as international competition could push the big guys to get even bigger.”
Chart: Top US Companies by Market Cap
Reporting by Lewis Krauskopf; Editing by Alden Bentley and Bill Berkrot