WWhether you realize it or not, the stock market is a dynamic and constantly evolving investment vehicle. Although the reference S&P 500 tends to rise over long periods of time, the stocks primarily responsible for pushing the widely followed index to new highs change regularly.
For example, nine of the top 10 stocks by market capitalization in 2004 are no longer in the top 10 to date. Indeed, the insurer AIG now sits around # 250 in the market capitalization rankings.
While a number of the largest publicly traded companies today have a good chance of staying near the top of the rankings in terms of market capitalization – for example, Apple, Amazon, Microsoft, and Alphabet – many small companies could become one of the biggest stocks in the market within two decades.
The following five stocks all have the capacity for innovation and addressable markets to become some of the biggest stocks by 2040.
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Square
Although it currently ranks just outside the top 100, in terms of market capitalization, the fintech share Square (NYSE: SQ) has an excellent chance of becoming one of the biggest stocks by 2040. Square could also become one of the biggest payments companies in the world.
For more than a decade, Square has relied on its seller ecosystem as a foundational puzzle piece. This segment provides point of sale devices, analytics, loans, and other tools to help traders succeed. In 2012, Square recognized $ 6.5 billion in gross payment volume (GPV) on its network. This year, the seller ecosystem could exceed $ 150 billion in GPV.
Better yet, this merchant fee-focused segment sees a higher percentage of GPV coming from larger companies, as defined by annualized GPV. Large merchants using its payment ecosystem are expected to generate an ever increasing gross margin.
But the biggest driver of long-term growth is the peer-to-peer digital payments platform Cash App, which grew its monthly active user base from 7 million to 36 million in three years, ended 31. December 2020. Cash App enables Square to generate revenue from more channels, including investments, and generates gross profit of $ 55 per user (in Q2 2021), compared to a cost of $ 5 to attract each New user. With the acquisition of buy now, pay later After payment, Square will have its own closed payments ecosystem, which could really increase its growth potential.
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Shopify
Although it is already one of the top 60 companies by market capitalization, a cloud-based e-commerce platform Shopify (NYSE: SHOP) could well be among the top 10 companies in terms of size by 2040.
The main trend behind the rise of Shopify is simple: more and more businesses are moving their operational presence online. Whether it’s standalone online retail sales or the opportunity to appear in third-party marketplaces, Shopify is ready to help businesses of all sizes grow their ecommerce business. In some context, FTI Consulting estimates that the online retail market share as a percentage of total US retail sales will grow from 18% in 2020 to 33% by 2030.
In addition, the services provided by Shopify offer a high margin and generate predictable cash flow. While Shopify’s addressable market for small businesses sits at $ 153 billion, according to the company, that figure doesn’t account for continuous innovation, regular new product introductions, or its ability to close deals. deals with large companies that buy its $ 2,000 per month Shopify Plus subscription service.
If Wall Street’s consensus sales estimates prove to be correct, the company’s sales are expected to more than quintuple by 2025, with no signs of slowing down.
Image source: Getty Images.
Airbnb
Another big disruptor aspiring to be one of the biggest stocks by 2040 is the living and accommodation platform. Airbnb (NASDAQ: ABNB). To do this, Airbnb is expected to climb about 100 places in the market capitalization rankings over the next 19 years.
It is above all a complete upheaval of the traditional hotel operating model. According to Airbnb, more than 4 million homes worldwide are used for accommodation and are, in many cases, cheaper, more convenient and more private than local hotels. Although the pandemic has put a wrench in the work for a few quarters, it should be noted that bookings have more than quintupled in the three-year period between late 2016 and late 2019.
Additionally, the fastest growing segment for Airbnb is long-term stays (defined as 28 days or more). As the world grows further apart in the wake of the pandemic, Airbnb has the potential to get the lion’s share of business from these people working from anywhere.
And don’t overlook the Experiences segment, which hires local experts to guide travelers on their adventures. The experiments will allow Airbnb to further infiltrate the $ 9.2 trillion travel and tourism industry.
Image source: Getty Images.
Selling power
While Airbnb has a big hill to climb to become one of the biggest stocks by 2040, the cloud-based customer relationship management (CRM) software provider Salesforce.com (NYSE: CRM) is closer to this brand than any other company on this list. With a market capitalization of nearly $ 300 billion, it appears to be on its way to becoming a fundamental tech giant that other companies envy.
For those unfamiliar with CRM software, it is used by businesses that have direct contact with consumers to improve customer relationships and increase sales. He can help oversee online marketing campaigns, manage product or service issues, and run predictive sales analytics on an existing customer base.
What makes Salesforce special is its complete dominance over the CRM space. According to IDC, it was responsible for 19.5% of global CRM spend in 2020. That’s more than the 2-5 in market share on a combined basis. Spending on CRM software is expected to experience double-digit annual growth until at least the middle of the decade, and Salesforce’s share of that trend is virtually untouchable.
Salesforce CEO Marc Benioff has also overseen a number of revenue-generating acquisitions and ecosystem expansion, including MuleSoft, Tableau and the latest, Slack Technologies. With acquisitions included, Salesforce can continue to double sales every four or five years.
Image source: Getty Images.
Limited sea
Singapore-based fifth and final company that could become one of the biggest stocks by 2040 Limited sea (NYSE: SE). Sea currently sits in the top 50, with a market cap of nearly $ 200 billion.
Sea’s secret weapon is that it has not one or two, but three rapidly growing operating segments. At the moment, the company’s gaming division is the only one to generate positive earnings before interest, taxes, depreciation and amortization (EBITDA). The company had around 725 million mobile game users in the second quarter, of which 12.7% paid to play. This is a pay-to-play conversion rate well above the industry average, close to 2%.
But the real draw here is the Shopee e-commerce platform, which is the most downloaded shopping app in Southeast Asia and also gaining momentum in Brazil. Shopee primarily targets emerging markets and has experienced breathtaking growth over the past two years. For example, the $ 15 billion gross value of goods (GMV) purchased in the second quarter places Shopee’s annual sales rate 500% higher than the GMV produced during all of 2018.
Finally, the business digital financial services segment may be successful in emerging, underbanked markets. Although this is a relatively new division, it already has nearly 33 million paying mobile wallet customers. Together, these segments give Sea Limited a real chance to easily surpass a $ 1,000 billion valuation.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of the board of directors of The Motley Fool. Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. Teresa Kersten, an employee of LinkedIn, a subsidiary of Microsoft, is a member of the board of directors of The Motley Fool.
Sean Williams owns shares of Amazon and Square. The Motley Fool owns shares and recommends AFTERPAY T FPO, Airbnb, Inc., Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Microsoft, Salesforce.com, Sea Limited, Shopify and Square. The Motley Fool recommends the following options: long calls at $ 1,920 in January 2022 on Amazon, long calls in January 2023 at $ 1,140 on Shopify, long calls in March 2023 at $ 120 on Apple, short calls in January 2022 at 1 $ 940 on Amazon, short calls in January 2023 to $ 1,160 on Shopify and short March 2023 calls for $ 130 on Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
