3 stocks that could be worth more than Apple by 2040

Wall Street tends to offer only one guarantee: change. Over time, today’s largest companies by market capitalization are likely to be replaced by new, innovative companies.

For example, only one of the 10 largest publicly traded companies in 1999 is still in the top 10 by market capitalization today (Microsoft). The other nine stocks, which included titles like nokia and AIGfell far down the list.

The same fate may await the kingpin of technology Apple (AAPL 4.08%).

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Apple sits atop Wall Street’s pedestal…for now

At the moment, Apple sits on a pedestal above all other US-listed stocks with a market cap of over $2.4 trillion — and it’s not hard to see why. For starters, Apple has one of the most recognized brands in the world, as well as a very loyal customer base. Whenever a new product is launched, it’s not uncommon to see queues wrap around Apple stores.

To build on that point, the company has half of the U.S. smartphone market share, according to data from Counterpoint, which shows how innovation has driven consumers toward the iPhone brand for over 100 years. a decade. Additionally, Apple CEO Tim Cook is overseeing a steady operational transition that emphasizes subscription services rather than physical products. While that doesn’t mean Apple is giving up innovation on iPhone and Mac, it just means the company is focusing on higher-margin, loyalty-building subscriptions that diversify its revenue streams and make replacement cycles faster. less turbulent products.

These could be the biggest stocks in the world by 2040

But even Apple isn’t perfect. The company’s sales growth has slowed significantly, and persistent stock buybacks account for a significant portion of expected earnings growth. It’s plausible that Apple’s best days are now in the rearview mirror. What follows are three stocks that could, under the right circumstances, surpass Apple’s market capitalization by 2040 or earlier.

An Amazon delivery driver leans out the window of his van to speak with a colleague.

Image source: Amazon.

The obvious choice: Amazon

Although Microsoft is a legitimate choice to overtake Apple in market value over the next 18 years, it is the e-commerce giant Amazon (AMZN 3.66%) it looks like the obvious selection to potentially become the world’s largest stock by market capitalization.

As many of you probably know, Amazon is the undisputed leader in online retail. A March 2022 report from eMarketer estimates that the company will bring in 39.5% of all online spending in the United States this year. That’s more than 8 percentage points ahead of #2-15 in market share, combined!

Such online retail dominance is what has helped the company sign up 200 million people worldwide for Prime membership. Annual fees collected from Prime members play a key role in helping Amazon lower prices from traditional retailers, as well as supporting investment in its extensive logistics network.

However, online retail is not the catalyst that could allow Amazon to overtake Apple. That distinction goes to its cloud infrastructure services segment, Amazon Web Services (AWS), which accounts for about a third of global cloud infrastructure spending.

More importantly, cloud spending is still in its infancy, with cloud services generating significantly higher operating margins than online retail. In theory, Amazon’s retail sales could decline, but the company’s operating cash flow would continue to increase due to AWS’s steady double-digit growth.

In addition to AWS, Amazon is enjoying double-digit sales growth in its other higher-margin operating segments, such as advertising and subscription services. As long as the cash cow segments continue to outperform, Amazon has a good chance of overtaking Apple well before 2040.

A person wearing a virtual reality headset reaching out.

Image source: Getty Images.

If all went well: Meta Platforms

Another stock with the tools and intangibles needed to overtake Apple in market value by 2040 or earlier is Metaplatforms (FB 1.83%), the company previously known as Facebook. But unlike Amazon, it will need a few dominoes to overtake Apple.

Even though social media stocks have been exceptionally volatile lately, Meta is the clear leader in the industry. Its social destinations (Facebook, WhatsApp and Instagram) are regularly among the most downloaded. At the end of the first quarter, Meta’s app family had 3.64 billion monthly active users.

In other words, more than half of the adult population in the world interacts with a Meta-owned asset every month. That’s enough incentive for companies to pay top dollar to get their messages in front of users.

Additionally, Meta CEO Mark Zuckerberg has not significantly monetized all of his company’s core assets. The vast majority of Meta’s ad revenue comes from Facebook and Instagram. If and when the company turns on the tap for Facebook Messenger and WhatsApp, Meta’s growth and operating cash flow can kick into high gear.

The real wild card for meta-platforms is the development and evolution of the metaverse, i.e. the next iteration of the Internet, which allows connected users to interact with each other and with their environment in 3D virtual worlds. Meta plans to invest tens of billions of dollars into the Metaverse, hoping to become a leader in what could well be a multi-billion dollar opportunity. The unknown here is how long it will take to build the infrastructure to support the metaverse.

If the Metaverse ends up maturing faster than expected and Meta Platforms becomes one of the on-ramps to virtual and augmented reality, it might have a clear path to leapfrog Apple.

Two students sharing a laptop.

Image source: Getty Images.

The long shot: Sea Limited

If you want a real longshot that can outrun Apple in less than two decades, consider the Singapore-based conglomerate Sea Limited (SE 4.16%).

The sea is a long shot for several reasons. For starters, it trails Apple a mile in valuation ($46.4 billion market cap vs. Apple’s $2.42 trillion). The company is also losing quite a bit of money as it reinvests in its three main operating segments.

While Apple generated more than $116 billion in operating cash flow during the 12-month period, Sea suffered operating cash flow exit of $833.3 million in the comparable period. But over the next 18 years, Sea could deliver eye-popping sales and (eventually) profit growth.

Currently, Sea’s gaming division, known as Garena, is the only segment to produce positive earnings before interest, taxes, depreciation and amortization (EBITDA). mobile game Free fire was a global hit, with nearly 616 million people actively playing it and other mobile games in the first quarter.

What’s important is that 10% of those quarterly active users are paying to play. This pay-to-play conversion rate is several times higher than the industry average.

The second operational segment of interest is digital financial services. The number of quarterly active users accessing its SeaMoney products and services, such as digital wallets, increased by 78% through March 31, 2022 to 49 million. A number of markets Sea focuses on have limited access to basic banking solutions. So providing access to banking solutions through digital wallets could be a game-changer for Sea and its customers in emerging markets.

Finally, Sea has a booming online retail segment known as Shopee, which has consistently been the most downloaded shopping app in Southeast Asia. The company has also made significant inroads in Brazil.

After overseeing $10 billion in gross market value (GMV) on its e-commerce platform throughout 2018, the company oversaw $17.4 billion in GMV in the first three months of 2022 alone. -market, Sea has the ability to capitalize and become extremely profitable over time.

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