24/7 Wall St. Insights

• Apple Inc. (NASDAQ: AAPL) was the first U.S. company valued at $1 trillion, then $3 trillion, but will it be first to $5 trillion?
• If not, the most likely candidates are fellow Magnificent 7 members.
• Also: 2 Dividend Legends to Hold Forever.

Apple Inc. (NASDAQ: AAPL) became the first U.S. company valued at $1 trillion back in August of 2018. By 2022, it had hit a $3 trillion valuation. Microsoft Corp. (NASDAQ: MSFT) and Nvidia Corp. (NASDAQ: NVDA) joined that club after, though the latter recently slipped below $3 trillion again. When it comes to predicting which publicly traded corporation will top a valuation of $5 trillion first, the most likely candidates are the so-called Magnificent 7 stocks. Six of them already have market caps above a trillion dollars, as well as the momentum to reach $5 trillion sooner than later.

Let’s have a look at how long it may take those stocks to reach the $5 trillion benchmark, first based on their growth in the past year. Then we’ll compare that to the time it will take based on what Wall Street expects their growth to be in the coming year, given their mean price targets.

Why Invest in Mega-Cap Stocks?

Large-cap companies tend to be seen as safer investments, as these companies are well-established in their markets and have long histories. Plus, their returns are often boosted by dividends. The Magnificent 7 stocks are among the largest tech stocks and have driven the broader markets for the past couple of years, generating outstanding returns for long-term shareholders.

Alphabet

• Market cap: $2.0 trillion
• Past-year growth: 26.0%
• Time to $5 trillion: 28 months
• One-year growth estimate: 23.2%
• Time to $5 trillion: 24 months

By both measures, Alphabet Inc. (NASDAQ: GOOGL) reaches a $5 trillion market cap in two years or so. Over the past two years, the stock performance has been similar to the Nasdaq. But TTM revenue has grown for nearly every quarter for more than a decade, and per-share earnings are projected to grow more than 20% in the next five years. Of 43 analysts covering the stock, 38 recommend buying shares, 13 of them with Strong Buy ratings.

Amazon

• Market cap: $2.0 trillion
• Past-year growth: 48.4%
• Time to $5 trillion: 21 months
• One-year growth estimate: 14.7%
• Time to $5 trillion: 33 months

The discrepancy between the two estimates on how long it takes Amazon.com Inc. (NASDAQ: AMZN) to reach a $5 trillion market cap suggests that its momentum has slowed or will for the near future. Here too, the stock performance has been similar to the Nasdaq in the past two years. TTM revenue has grown in every quarter for more than a decade, and per-share earnings are projected to grow almost 32% in the next five years. All but four of the 47 analysts covering the stock recommend buying shares, 15 of them with Strong Buy ratings.

Meta

• Market cap: $1.4 trillion
• Past-year growth: 87.7%
• Time to $5 trillion: 14 months
• One-year growth estimate: 0.4%
• Time to $5 trillion: 109 years

The discrepancy here is huge, suggesting that Wall Street lacks faith in growth at Meta Platforms Inc. (NASDAQ: META), at least for the next year. Shares are trading near a recent all-time high and have handily outperformed the Nasdaq in the past year. TTM revenue has grown in most quarters for more than a decade. Per-share earnings are projected to increase by more than 13% in the next five years. Because the consensus recommendation of analysts is to buy shares, some price target hikes could soon boost the growth estimate.

Apple

• Market cap: $3.5 trillion
• Past-year growth: 30.5%
• Time to $5 trillion: 14 months
• One-year growth estimate: 6.5%
• Time to $5 trillion: 51 months

First to $1 trillion, and first to $3 trillion; will it be first to $5 trillion? Here too, Wall Street seems to feel that Apple has lost its momentum. For much of the past year, the stock has underperformed the Nasdaq. TTM revenue has plateaued for about a year and half, and per-share earnings are expected to grow about 11% in the next five years. However, of 38 analysts covering the stock, 32 of them have Buy or better ratings.

Microsoft

• Market cap: $3.2 trillion
• Past-year growth: 37.3%
• Time to $5 trillion: 12 months
• One-year growth estimate: 15.3%
• Time to $5 trillion: 29 months

So, does Microsoft take the lead from Apple? If it keeps up its current momentum, a $5 trillion valuation is only a year away. The stock has gained about 212% in the past five years, while the Nasdaq is almost 128% higher. TTM revenue has grown for nearly every quarter for more than a decade, and per-share earnings are expected to increase more than 14% in the next five years. The number of analysts with Hold ratings rose recently from two to six. However, 14 of them have Strong Buy ratings, and 13 more also recommend buying shares.

Nvidia

• Market cap: $2.9 trillion
• Past-year growth: 180.0%
• Time to $5 trillion: seven months
• One-year growth estimate: 26.4%
• Time to $5 trillion: 22 months

By either measure, Nvidia gets to $5 trillion first. That may be little surprise, as shares of this AI darling are up more than 864% in the past two years, despite pulling back almost 6% in the past month. TTM revenue has risen from less than $26 billion to over $96 billion in the past several quarters. Analysts anticipate earnings per share growth of more than 52% in the next five years. Analyst sentiment has softened recently, but the consensus recommendation is still to buy shares.

While Nvidia is most likely to reach a $5 trillion valuation first, it may be safe to expect it to take longer than seven months. If it takes the almost two years that Wall Street projects, and one of its rivals manages to keep up or regain its momentum, Nvidia could still be beaten to the finish line.

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