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Sunday, 02/04/2024 10:54:55 AM

Sunday, February 04, 2024 10:54:55 AM

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Prediction: These 2 Stocks Hit a $1 Trillion Market Cap By The End Of 2024?
Daniel Foelber, The Motley Fool
Sun, February 4, 2024 at 7:35 AM EST·6 min read
In this article:
It wasn't long ago that investors were wondering if a publicly traded U.S.-based company would ever reach the $1 trillion threshold. But in early August 2018, Apple hit that coveted mark. Not long after that, the market saw a correction. The market sold off heavily in late 2018 over tensions with the U.S.-China trade war and uncertain Federal Reserve policy. It eventually recovered, but then the COVID-19 sell-off of spring 2020 hit.

Another recovery took hold in short order and Apple regained trillion-dollar status, even rising above $2 trillion. By early January 2022, Apple was knocking on the door of a $3 trillion market cap, Microsoft was hovering around $2.5 trillion, Alphabet was almost at $2 trillion, Amazon and Tesla (NASDAQ: TSLA) were both over $1 trillion, and Meta Platforms (NASDAQ: META) was less than 10% away from hitting $1 trillion.

2022 turned out to be a brutal year for big tech. When the dust had settled, only Apple, Microsoft, and Alphabet were still above $1 trillion in market cap.

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Cycles happen, especially with companies with many different business units and an international footprint. Instead of trying to time the market by guessing which companies could surpass the $1 trillion threshold, a better idea would be to find the companies that can not only reach $1 trillion by the end of 2024 but are likely to build upon that valuation in the future.

After Meta's blowout earnings report this week, six companies are currently over $1 trillion in market cap -- Microsoft, Apple, Amazon, Alphabet, Nvidia, and Meta.

Here's why Tesla and Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) are two top stocks worth buying before returning to trillion-dollar valuations.

A person sitting at a desk behind a computer while staring at their phone and smiling.
Image source: Getty Images.
1. More drama with Tesla stock

Tesla stock doubled in 2023 but it is still down nearly 50% from its all-time high. And for good reason. Despite hitting its 2023 production goal, Tesla's growth has slowed -- especially when you look at profits and revenue. Its margins are also down as Tesla had to cut prices to make up for weak demand.

TSLA Revenue (TTM) Chart
TSLA Revenue (TTM) Chart
If you look at trailing-12-month figures, sales are up just 11.5%, net income is down 8.5%, and the operating margin has fallen by over 25% to just 11.2%.

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CEO Elon Musk hasn't done the company any favors as of late either, saying he is "uncomfortable growing Tesla to be a leader in AI and robotics" unless he has more voting control of the company.

Tesla can be a roller coaster of a stock and will probably remain volatile not just because it is in a cyclical industry, but also because the top brass can pour a lot of emotion into the company. However, you can argue that this emotion has done more good than harm.

Tesla remains the undisputed leader in electric vehicles (EVs). And although competition is mounting, no company is close to holding a candle to Tesla when it comes to the balance between profitability, international exposure, growth potential, and the trajectory the company is on to release lower-priced EV models for customers.

Six years ago, Tesla was inconsistently profitable and hadn't scaled production of the Model 3 to achieve consistent cash flows. At that stage, emotional comments carried more weight. But today, Tesla is much more secure. Elon Musk is the voice of Tesla, but he is far from calling all the shots or operating with unilateral control.

Tesla has the balance sheet and cash flows to endure a self-inflicted setback or an industrywide slowdown. There's also a good chance that Tesla will take market share during a slowdown rather than lose it because other companies with legacy operations and budding EV segments may be more inclined to cut EV spending than damage an existing cash cow.

Overall, Tesla is a good balance of risk and reward if you can stomach the volatility
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