Whether you realize it or not, the stock market is a dynamic investment vehicle that’s constantly evolving. Although the benchmark S&P 500 tends to head higher over long periods of time, the stocks primarily responsible for pushing the widely followed index to new heights change regularly.
As an example, nine of the 10 largest stocks by market cap in 2004 are no longer in the top 10 as of today. In fact, insurer AIG now sits around No. 250 in the market cap rankings.
While a number of today’s largest publicly traded companies have a good shot at remaining near the top of the leaderboard in terms of market cap — e.g., Apple, Amazon, Microsoft, and Alphabet — many smaller companies could emerge as some of the market’s biggest stocks within two decades.
The following five stocks all have the innovative capacity and addressable markets to become some of the biggest stocks by 2040.
Although it currently ranks just outside the top 100, in terms of market cap, fintech stock Square (NYSE:SQ×https://www.fool.com/quote/nyse/sq/) has an excellent chance to become one of the largest stocks by 2040. Square may also become one of the most instrumental payment companies in the world.
For more than a decade, Square has leaned on its seller ecosystem as its foundational puzzle piece. This segment provides point-of-sale devices, analytics, loans, and other tools to help merchants succeed. In 2012, Square recognized $6.5 billion in gross payment volume (GPV) on its network. This year, the seller ecosystem could top $150 billion in GPV.
Best of all, this merchant fee-driven segment is seeing a larger percentage of GPV originate from bigger businesses, as defined by annualized GPV. Larger merchants using its payment ecosystem should result in steadily growing gross profit.
But the bigger long-term growth driver is peer-to-peer digital payments platform Cash App, which has grown its monthly active user base from 7 million to 36 million in three years, ended Dec. 31, 2020. Cash App allows Square to generate revenue from more channels, including investments, and is bringing in $55 in gross profit per user (as of Q2 2021), compared to a $5 cost to attract each new user. With the acquisition of buy now, pay later company Afterpay, Square will have its very own closed payment ecosystem, which could really ramp up its growth potential.
Though it’s already a top-60 company by market cap, cloud-based e-commerce platform Shopify (NYSE:SHOP×https://www.fool.com/quote/nyse/shop/) may well be a top-10 company in size by 2040.
The core trend backing Shopify’s ascent is simple: more and more businesses are shifting their operating presence online. Whether it’s stand-alone online retail sales or the ability to appear in third-party marketplaces, Shopify is ready to help businesses of all sizes grow their e-commerce business. For some context, FTI Consulting estimates that online retail market share as a percentage of total retail sales in the U.S. will grow from 18% in 2020 to 33% by 2030.
Furthermore, the services Shopify provides are high-margin and generate predictable cash flow. While Shopify’s addressable market for small businesses sits at $153 billion, according to the company, this figure doesn’t account for continued innovation, the regular introduction of new products, or its ability to secure deals with larger businesses that purchase its $2,000 a month Shopify Plus subscription service.
If Wall Street’s consensus sales estimates prove accurate, sales for the company are on pace to more than quintuple by 2025, with no signs of slowing.
Another big-time disruptor with aspirations of becoming one of the largest stocks by 2040 is the stay-and-hosting platform Airbnb (NASDAQ:ABNB×https://www.fool.com/quote/nasdaq/abnb/). To do so, Airbnb would need to climb around 100 spots in the market cap rankings over the next 19 years.
First and foremost, it’s completely disrupting the traditional hotel operating model. According to Airbnb, over 4 million households worldwide are being used for hosting, and are, in many cases, cheaper, more convenient, and more private than local hotels. Though the pandemic threw a monkey wrench into the works for a couple of quarters, it’s worth pointing out that bookings more than quintupled in the three-year period between the end of 2016 and the end of 2019.
What’s more, the fastest-growing segment for Airbnb is long-term stays (defined as 28 or more days). As the world becomes more remote in the wake of the pandemic, Airbnb has an opportunity to secure the lion’s share of business from these work-from-anywhere individuals.
And don’t overlook the Experiences segment, which hires local experts to lead travelers on adventures. Experiences will allow Airbnb to further infiltrate the $9.2 trillion travel and tourism industry.
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