Last week, the benchmark S&P 500 did what it has been doing throughout most of 2021: It jumped to another record close. however, the broad-based index is not the only thing on stock market hitting rarified air.
Just recently, Tesla Motors joined Microsoft, Apple, Amazon, Alphabet, and Meta Platforms, Facebook’s parent company, in getting to the psychologically critical $1 trillion valuation mark. There is little doubt that, as economies around the globe grow over time and companies innovate, we will see new additions to the trillion-dollar club.
In fact, the following two growth stocks all possess the potential to be valued at $1 billion in 15 years, if not earlier.
The biggest growth stock of these two by market cap is Mastercard, which is effectively a tripling in its value away from reaching a $1 trillion valuation. If smart investors give Mastercard around 15 years, they could triple in market cap.
One of the best things about payment processors such as Mastercard is they benefit from longer periods of expansion. Although recessions are an inescapable part of the economic cycle, they generally only last for two months to a few quarters. By comparison, expansions usually last for years. This gives Mastercard a lot of time to reap the rewards of elevated corporate and consumer spending.
Another reason Mastercard is growing is its avoidance of lending. You would think with the United States and global economy relishing such long periods of economic growth that Mastercard would want to generate interest and fee income. However, when recessions arrive, lenders are made to backpedal by putting aside capital to cover loans in default. Mastercard is better stationed to navigate any economic downturn with no loans outstanding. Avoiding lending is what has helped push its profit margin frequently above 40%.
With a lot of opportunity to grow its payment infrastructure to new markets, Mastercard’s expansion rate should remain powerful throughout the decade, if not well beyond.
Cloud-based customer relationship management software provider Salesforce.com also has the tools needed to grow from its current $297 billion value to $1 trillion within 15 years.
For those who don’t know what CRM software is, it is used by consumer-facing companies to enhance client relationships and boost sales. It can be used to handle online marketing campaigns, oversee service or product issues, and most importantly run predictive sales inquiries on an existing client base.
What makes Salesforce unique is its role as CRM kingpin. As reported by IDC, Salesforce collected 19.5% of CRM software spending last year, which was over one percentage point higher than number 2 through number 5 in market share… combined! CRM software is discovering use in new sectors (e.g.,healthcare, industrial, and financial) and gives sustainable double-digit growth possibilities for the foreseeable future.
Also helping Salesforce is CEO Marc Benioff’s frugal acquisitions. Acquiring Tableau, MuleSoft, and most recently Slack, has grown the Salesforce company, and made its services more available to both medium and small sized companies, and given the firm new places to cross-sell its highly profitable services.
Author: Steven Sinclaire