Stocks with a market cap of $1 trillion (or more) tend to attract more investors than their small-cap counterparts. There are several reasons for this. For starters, these companies are typically well-established players with a proven track record and significant influence in their respective industries.
Furthermore, large-cap companies frequently have greater access to capital markets, making it easier to raise funds for expansion, acquisitions, and innovation. Their size and resources enable them to withstand economic crises better than smaller businesses.
Tech titans such as Apple (AAPL), Meta Platforms (META), Nvidia (NVDA), Alphabet (GOOGL), and Microsoft (MSFT) are currently valued at more than $1 trillion. Recently, CNBC Mad Money host Jim Cramer said he believes that Eli Lilly (LLY) and Walmart (WMT) will soon join the $1 trillion market capitalization club. Let’s find out why.
Eli Lilly Stock
Eli Lilly (LLY), valued at $764.3 billion, is a biopharmaceutical company with a long history of innovation and expansion. The company has some successful drugs on the market that treat diabetes, psoriasis, and other conditions and have generated significant revenue, which has boosted the company's finances.
Furthermore, its blockbuster weight-loss drugs, Mounjaro and Zepbound, have piqued investors' and Wall Street's interest.
Eli Lilly stock has gained 43.3% YTD, compared to the S&P 500 Index’s ($SPX) gain of 16.5%.
Eli Lilly's robust pipeline, successful product launches, and strategic acquisitions have resulted in impressive growth over the years, increasing its overall market value. The company has huge opportunities in the weight-loss drug market, which is expected to be worth $82.8 billion by 2032. The company is also developing treatments for Alzheimer's, cancer, and other autoimmune diseases.
Cramer notes that Eli Lilly's drugs for diabetes and weight loss are in high demand. They also have the potential to be used for a variety of other conditions, including cardiovascular and liver diseases.
Recently, the Food and Drug Administration (FDA) approved Lilly's Alzheimer's treatment, Kisunla, for adults with early symptomatic Alzheimer's disease (AD). Cramer believes the Alzheimer's drug could be a huge success for the company.
Lilly's first-quarter revenue increased by 26% to $8.7 billion, while earnings grew by 59%. Mounjaro, Zepbound, Jardiance (used to treat diabetes), and Verzenio, an oncology drug, all contributed to this performance.
Analysts expect Lilly's earnings to increase by 117% and 38.4% in 2024 and 2025, respectively. Lilly's products are already very successful. Furthermore, its commitment to bringing new drugs to market leads me to believe the company will thrive in the coming years, eventually joining the $1 trillion club.
Out of the 21 analysts covering LLY stock, 18 rate it a “strong buy,” one rates it a “moderate buy,” and two rate it a “hold.” The average target price of $914 suggests the stock has an upside potential of 10.8% above current levels. However, its high target price of $1,100 implies a potential upside of 33.4% over the next 12 months.
Walmart Stock
Walmart (WMT), founded in 1962, is a well-known global retail giant. Over the last few decades, Walmart has evolved to be the largest retailer by revenue, with a market capitalization of $552.1 billion. It operates thousands of stores in a variety of formats around the world, and is well-known for its consistently low prices.
In comparison to the broader market, WMT stock is outperforming, up 31.1% YTD.
Walmart started as a single discount store and has since grown into a massive network of hypermarkets, supermarkets, and membership-only warehouse clubs. It operates roughly 10,500 stores and clubs in 19 countries worldwide. This huge global footprint is Walmart's economic moat and the reason for its unrivaled position.
Jim Cramer believes that Walmart's growth strategies, such as loyalty programs, will help the company "double in value over the next couple of years."
Walmart's "Everyday Low Price" strategy has been a success, resulting in consistent revenue and earnings growth even during challenging times. In fiscal 2024, the company's revenue increased 6% to $648.1 billion, while adjusted earnings increased 5.7% to $6.65 per share.
Recently, Walmart announced its decision to acquire VIZIO for an all-cash transaction of $11.5 billion. The company intends to use Vizio's SmartCast Operating System (OS) to connect with its customers via "innovative television and in-home entertainment and media experiences."
Walmart has also collaborated with Symbotic, an AI-powered robotic and software platform, to automate the supply chain process in all 42 of its distribution centers across the United States. It also owns an 11% stake in Symbotic. This advanced logistics and inventory management system will save the company money while boosting its earnings.
While investing in growth strategies and acquisitions, Walmart has kept its debt-to-equity ratio low, at 0.49. Walmart is also a Dividend King, having increased its dividend for the past 51 years. This includes its recent quarterly dividend hike of 9%. Walmart pays a 1.2% forward yield and has a manageable payout ratio of 33.4%, leaving room for dividend growth.
Analysts predict that Walmart's revenue will rise steadily over the next two years, with revenue and earnings increasing by 4.6% and 9.3%, respectively, in fiscal 2025. Further, revenue and earnings are expected to rise 4.06% and 9.9%, respectively, in fiscal 2026.
Walmart's dominant market position, strategic growth initiatives, and global expansion plans lead me to believe that the company's position in the retail industry is secure. Walmart is capable of joining the $1 trillion market cap club over the next couple of years.
Overall, Wall Street has a bullish outlook for Walmart stock, rating it a “strong buy.” Out of the 31 analysts covering WMT stock, 24 have a “strong buy” recommendation, four rate it a “moderate buy,” and three suggest it’s a “hold.” Its average price target of $73.43 suggests an upside potential of 6.5% from current levels. However, its Street-high estimate of $82 implies a potential upside of about 18.9% in the next 12 months.
