One of the more interesting subplots of the artificial intelligence (AI) boom this year was chip designer Nvidia's (NVDA) ascent to join big dogs like Apple (AAPL) and Microsoft (MSFT) among the ranks of companies with trillion-dollar market caps. It's a fairly exclusive group right now - but judging by the growth prospects for some of the top U.S. mega-caps, the $1 trillion club could easily expand its membership in the years to come.
While the stock market is struggling through a particularly volatile patch at the moment, long-term investors looking to buy on the dip may want to consider scooping up shares of the next crop of trillion-dollar corporations - before they hit the 13-digit club. Here's a look at three top prospects to consider from the mega-cap group.
Meta Platforms: The Social Media Giant Branches Out
Meta Platforms (META), formerly Facebook, is famously on a metaverse journey where virtual reality connects people and digital content.
Meta's stock has surged 142% in the past 52 weeks, and now boasts a hefty market cap of $794.2 billion – ranking it as the fifth-largest U.S. company.
Meta's strength lies in its social media dominance, with over 3 billion monthly active users across platforms like Instagram, WhatsApp, and Messenger. They also own Oculus, a VR headset leader, and are committed to metaverse development, led by CEO Mark Zuckerberg, who envisions a multi-trillion-dollar metaverse industry.
On the earnings front, Meta has exceeded expectations in each of the past three quarters. In Q2 2023, META reported earnings per share of $3.23, beating the estimate by 12.54%. Revenue, largely from advertising, grew 56% YoY to $29.1 billion, showcasing operational efficiency with a 43% operating margin.
Meta's Q3 earnings report is due this Wednesday, Oct. 25, and analysts project earnings per share of $3.57 - a 117% YoY increase - with revenue estimated at $33.4 billion.
As it approaches a trillion-dollar market cap, Meta stands out as an attractive mega-cap stock due to its growth potential in the metaverse and in AI, along with improving financials.
With an average target price of $366.08 from analysts, suggesting 16% upside from current levels, Meta stands out as a compelling choice for long-term investors.
Berkshire Hathaway: Warren Buffett's Legendary Conglomerate
Berkshire Hathaway (BRK.B) - better known as Warren Buffett's conglomerate - is a diverse powerhouse with interests in multiple industries, from insurance and railroads to energy and consumer goods, along with a legendary portfolio of equity holdings. Berkshire has a market cap of $729.17 billion, just behind Meta.
As recently as last month, BRK.B hit a new high of $373.34 per share. The stock is up 19% over the past 52 weeks to outpace the S&P 500 Index ($SPX) by 7 percentage points over this time frame.
Financially, Berkshire is a stalwart, with Q2 2023 operating profit topping $10 billion for the first time ever. Rising interest rates benefited Berkshire's cash hoard and other fixed-income investments, while a massive tech rally boosted the portfolio's outsized Apple stake.
With a physical cash hoard near record levels, around $50 billion, Berkshire is well positioned for future buybacks, as well as new opportunities and acquisitions.
The next chapter unfolds on Nov. 3, when Berkshire reports Q3 earnings. Analysts predict earnings per share of $4.74, up 34% from the year-ago period.
Analysts are in Buffett's corner, with the average target price of $414.00, suggesting 23% upside from current levels. The consensus rating is a “strong buy,” with only one analyst out of three suggesting a “hold.”
Why should long-term investors be excited about Berkshire? Beyond Warren Buffett's steady hand to guide it, this mega-cap stock checks all the boxes for stability, diversification, and growth.
ExxonMobil: Oil Giant Makes Strategic Moves
ExxonMobil (XOM) is a massive global energy player that's not content to rest on its status as the largest U.S. oil company. Specifically, Exxon - which already has a market cap of $444.67 billion - just announced plans to acquire Pioneer Natural Resources (PXD) in a $60 billion deal that analysts expect to deliver long-term benefits in the crucial Permian Basin.
XOM has gained just 6% in the last 52 weeks to lag the broader market, but the stock has crushed the S&P by rising more than 263% in the last three years.
Along with Exxon's Permian growth strategy, the company is also investing $3 billion in low-carbon solutions by 2025, including hydrogen, biofuels, and carbon capture.
XOM missed Q2 EPS estimates on tough year-over-year comparisons, but comps should be easier when the oil major reports Q3 results on Oct. 27. Analysts expect earnings per share of $2.39, down 46%, with revenues estimated at $87.9 billion.
XOM is an attractive mega-cap stock on the path to $1 trillion, thanks to its strong cash flow, diverse portfolio, and multi-pronged strategy to grow energy production. Plus, their annual dividend of $3.64 per share yields 3.28%.
Analysts are bullish, with the average target price of $128.67 indicating a potential 17% upside from current levels. Analysts rate XOM a “moderate buy” overall, with 9 out of 17 analysts suggesting a “strong buy” and 8 recommending a “hold.”
For long-term investors seeking growth, stability, and returns, ExxonMobil is an excellent portfolio addition.
Conclusion
Berkshire Hathaway, Meta Platforms, and ExxonMobil all have the potential to reach trillion-dollar valuations in the years ahead through disciplined, strategic growth. Though risks remain, these corporate giants all have viable paths to join the elite trillion-dollar club. For risk-tolerant investors, buying stakes before they hit the milestone could generate substantial returns.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
