At this point, companies that sport a $ 1 trillion market rating are not that special. State-backed oil titan Saudi Aramco was valued at $ 2 trillion shortly after its IPO late in 2019. As of this writing, Call reached just $ 2 trillion, and Amazon, Microsoft, and Google parent Alphabet are over the entire market of $ 1 trillion. A number of other companies like Facebook are “only” a few hundred billion from reaching the 13-digit rating line.
The law of compound growth dictates many other companies will arrive at the random trillion-dollar valuation. Last month I outlined three stocks that I think it could do in the coming decades. Three more who take advantage of secular growth trends that could knock on the door of the $ 1 trillion valuation in 10 years Mastercard (NYSE: MA), Walt Disney (NYSE: DIS), en Adobe (NASDAQ: ADBE). Let’s take a closer look at what makes these three companies so valuable.
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1. Mastercard: One of the largest toll booths in the world
With a market cap of more than $ 330 billion, Mastercard would have to raise another 200% to make it into the trillion-dollar club. But with digital payments and fintech continuing to rise in the world, it’s not such a damn notion.
Mastercard – along with its rival Fisa, which has a market cap of more than $ 420 billion – has a virtual duopoly on the global payment processing sector. Mastercard processes about a third of the digital payment volume excluding China, which is for the most part outside entities, but which Mastercard received approval to enter from the People’s Bank of China in early 2020. Using a credit or debit card as another means of electronic payment is common in developed countries, but digital payments are generally still in growth mode and are expected to grow at a high one-digit rate in the coming decades. percentage.
Thus, even though it has generated more than $ 16 billion in revenue in the last 12 months (including a 19% decrease in revenue in the second quarter of 2020 in the wake of the economic lockdown), there is a lot too nice about Mastercard. The company reimburses service partners of its card issuers based on transaction volume, as well as a toll-house-like “switching fee” each time an individual transaction is processed. As economists develop slowly but steadily away from cash and e-commerce in interest, Mastercard’s payment volumes and number of transactions are sure to increase.
However, the best part about this company is the lean management model. Even in difficult times, Mastercard’s corporate margin was a massive 53% in the first half of 2020. Combined with the $ 11.5 billion in cash and short-term investments at the end of June 2020, this digital payment giant has a cash spigot to tap on to continue developing their network or get smaller fintech peers. This stock is worth creating a core portfolio for the long term.
Disney: The world’s favorite entertainment
Consumers vote for dollars, and using that metric, Disney is emerging as the most beloved entertainment brand. In addition to all the classic Disney characters and stories, the company is deeply invested in sports with ESPN, has extensive TV features via ABC and Fox, and has the Marvel superhero universe and Star Wars franchise – all in a vertically integrated realm that spans theme parks, film and broadcast entertainment and markets.
Of course, the effect of the current pandemic on Disney is well documented. The theme parks run on a limited basis (with the exception of those in Hong Kong, which remain closed). Many sporting events whose rights to broadcasting have sidelined. Cinemas are close. It’s not a pretty picture, and Disney’s sales picked up 42% in the three months ending June 2020. Yet, even in extreme circumstances, the House of Mice remained profitable, earning a business income of $ 1.1 billion on a turnover of $ 11.8 billion in the spring.
That is not to say that it is in great shape, but in the end, the entertainment segments that rely on personal interaction can recover. In the meantime, Mickey and company are not resting on their laurels. The direct-to-consumer segment that includes streaming features Disney +, Hulu, ESPN +, and Disney + Hotstar (in India and soon Indonesia) already has more than 100 million subscribers. A new international general entertainment service under the Star name that uses ABC and Fox TV and studio content is coming in 2021. And with the future of the theater sector Mulan will be the biggest live-streaming movie to date, available to Disney + subscribers for $ 29.99.
Simply put, Disney remains a powerful entertainment empire that helps lead the charge into a new digital age. It is far from perfect at the moment, but the current state of affairs will not last forever. And with a market capitalization of more than $ 230 billion, it’s not hard to imagine that the world’s leading entertainment consortium will grow a lot in a decade.
Adobe: Powering the ‘digital transformation’ of the world
Much has changed since the inception of the Internet in the 1990s. More than just a means of obtaining information, the Internet has created an interconnected digital world that is now the ultimate foundation for business operations and the means for it. obtaining and supplying goods and services. This “digital transformation” was already underway for COVID-19, but those companies and individuals who dragged their feet while making necessary technical updates had a fire among them in recent months.
That’s where Adobe (and a growing rival in) salesforce.com) comes in. Adobe started out as a creative software developer, but has used its leadership in that realm as leverage in a complete enterprise software suite. From day-to-day workflow management (such as signing electronic documents) to marketing management (ad purchasing and data monitoring) to creative tools (graphic design and digital content creation), Adobe has handled business. The options that lie ahead for the next few years seem endless.
Unscoring just how important this technologist has become, revenue increased 14% to $ 3.13 billion during its fiscal 2020 second quarter (the three months ending in May) and forecast management another 11% increase in the third quarter. The world may be in the grip of the recession, but spending on Adobe’s warnings remains almost unabated. And with the need for software and cloud services only expected to increase in the next 10 years, Adobe is at the forefront of a massive industry that is worth hundreds of billions worldwide each year and is still growing.
Currently valued at more than $ 220 billion, this software company has the furthest to go to reach $ 1 trillion on this list. But still in the expansion mode and up to and including jealous business margins of about 30%, there is a lot to like about Adobe. It is not unreasonable to think that in the course of a decade it will be close to the 13-sided market capital reach.
