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2 Companies That Could Be Worth $1 Trillion by 2030

The stock market is in bad shape this year. Major indices have slipped big time thanks to a bunch of headwinds that have led investors to hit the sell button.

The S&P 500 is down 23% so far in 2022, while the Dow Jones Industrial Average has slipped by 17.8%. And the tech-laden Nasdaq-100 Technology Sector index has been hammered big-time this year, dropping nearly 36% so far. The stock market gloom means that some big names that have performed well in the past have also crashed substantially.

Taiwan Semiconductor Manufacturing (NYSE: TSM), popularly known as TSMC, and Meta Platforms (NASDAQ: META) are down 29.4% and 51.3%, respectively, so far in 2022. As a result, the market capitalizations of both companies have taken big hits. TSMC’s market cap has fallen to $440 billion, while the big crash in Meta’s stock price has brought its market cap down to $443 billion. That’s a massive decline from where both companies were at the beginning of the year.

TSM Market Cap data by YCharts

However, it wouldn’t be surprising to see these two companies regain their mojo in the long run and hit a trillion dollars in market capitalization. Let’s see why that may be the case.

1. Taiwan Semiconductor Manufacturing

Semiconductors are in huge demand thanks to their applications across multiple end markets, ranging from automotive to smartphones to data centers to factories. And TSMC, a foundry that makes chips, has benefited from the massive spike in semiconductor demand.

The company’s revenue in the first quarter of 2022 increased 36% to $17.6 billion, while adjusted earnings shot up 46% year over year to $1.40 per share. Such impressive growth isn’t surprising, as TSMC is the biggest foundry in the world, with an estimated market share of 52% at the end of 2021. It enjoys a massive lead over second-place Samsung, which controls 18% of the global foundry market.

It is worth noting that TSMC has gradually increased its dominance of the global foundry market. The Taiwanese giant had a 48% share of this space at the beginning of 2019, but its focus on procuring machines to make advanced chips has helped it strengthen its hold over this space. More specifically, half of TSMC’s revenue in the first quarter came from chips made on a 7-nanometer (nm) node or lower.

That’s not surprising, as chipmakers are in a race to shrink the size of their chips to improve performance and reduce power consumption. Chip sizes are expected to shrink further to support emerging technologies such as the metaverse. Not surprisingly, TSMC is now ready to move beyond 5nm chip sizes to 3nm and 2nm chips.

The company is busy procuring advanced chipmaking tools from equipment suppliers that will help it sustain its technology lead over rivals. All of this indicates that TSMC is in a solid position to take advantage of the incremental growth in semiconductor sales in the long run. McKinsey estimates that global semiconductor sales could hit $1 trillion annually by 2030, compared to $600 billion in 2021, and TSMC’s pole position in this market means that it should be able to corner a substantial portion of the incremental opportunity on offer.

Not surprisingly, analysts expect TSMC’s earnings to grow at an annual rate of 20% for the next five years, though the lucrative end-market opportunity suggests that it could sustain that kind of growth until 2030. If that’s indeed the case, TSMC’s earnings could jump to $21 per share by the end of the decade from $4.12 in 2021.

TSMC’s five-year average forward earnings multiple stands at 21. A similar multiple in 2030 would translate into a stock price of $441, which represents a 5x jump over the company’s current price. As such, TSMC seems well on its way to becoming a trillion-dollar company by 2030.

2. Meta Platforms

Meta Platforms stock has lost half of its value in 2022 so far, with a huge chunk of that decline happening in a single day in February this year after the company reported weaker-than-expected results and delivered tepid guidance. Meta is facing multiple headwinds such as changes to Apple‘s privacy policy, surging inflation that’s affecting advertising budgets, and the Russia-Ukraine war — all of which are expected to impact its growth in 2022.

Analysts expect Meta’s revenue to increase just 7% in 2022 to $126.3 billion, while earnings are anticipated to drop to $11.75 per share from $13.77 per share last year. That points toward a major slowdown over last year, when Meta’s revenue jumped 37% and earnings were up 36%. However, there are a few reasons why the Facebook parent’s fortunes could turn around in the long run.

First, the company has a massive user base. It had 2.87 billion daily active people on its family of apps — Facebook, Messenger, Instagram, and WhatsApp — in March this year, an increase of 6% over the prior year. Such a solid user base makes Meta an ideal platform for advertisers looking to reach people. Now the global digital advertising market is expected to clock $1.45 trillion in revenue by 2030, which would be a huge improvement over last year’s outlay of $492 billion.

Given that Meta generated nearly $115 billion in advertising revenue last year, it is in a solid position to take advantage of the secular growth opportunity in digital advertising, especially considering its huge user base.

Second, Meta is looking to take advantage of emerging opportunities such as the metaverse, where it has started taking steps to monetize a massive revenue opportunity. The company’s Oculus headsets are already dominating the market for augmented reality/virtual reality headsets, which puts the company in a nice position to tap into another fast-growing space.

In all, it is not surprising to see why analysts expect Meta’s growth to pick up the pace from next year.

META EPS Estimates for Current Fiscal Year data by YCharts

More specifically, Meta’s earnings are expected to increase 19% next year, followed by a 15% spike in 2024. Meta’s multiple catalysts and huge end-market opportunities could help the company maintain a 15% annual earnings growth rate through 2030. If that’s the case, Meta’s earnings could jump to $35.80 per share from this year’s estimated figure.

Meta is trading at 15 times forward earnings. Assuming a similar multiple in 2030 and multiplying the same with Meta’s projected earnings would translate into a stock price of $537, which is more than thrice the current price. So even Meta could become a trillion-dollar company by the end of the decade given its current market capitalization and the potential upside that it could deliver.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Meta Platforms, Inc., and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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