Market uncertainty remains high right now. Indeed, all eyes are on today’s decision from the Federal Reserve with respect to whether interest rates will be held or raised once again. Accordingly, with all eyes on the macro backdrop right now, investors may want to focus in on some high-growth stocks with significant upside potential.
Importantly, there has been a surge in interest around companies in key growth sectors of late. Notably, companies involved in the AI and AR/VR sectors are outperforming most other stocks by a wide margin. Tech giants are continuing their surge higher, with many predicting more trillion-dollar stocks on the horizon.
So, the question many investors may be asking is: which tech giants could achieve such a valuation? Here are three lesser-known tech stocks with the potential for $1 trillion market cap. These are all companies with resilient business models and strong financials.
| SQ | Block | $64.73 |
| CRM | Salesforce | $210.95 |
| U | Unity Software | $41.05 |
Block (SQ)
Block (NYSE:SQ) is a leading fintech company that focuses on creating ecosystems where tools and services cohesively work together on a final product. The company is the creator of the Square, Cash App and the emerging TIDAL ecosystems.
The fintech industry is currently valued at $245 billion and is projected to grow at a 29.52% CAGR to $1.5 trillion by 2030. Additionally, the potential for global expansion is immense, with markets outside the U.S. and Europe driving rapid digitalization efforts.
Year-to-date, SQ stock has held steady, but strong growth potential is evident in its financials. Gross profit across all ecosystems was $1.71 billion, representing a 32% year-over-year increase, and gross profit for Block grew 27% year-over-year as well. Cash App’s gross profit surged 49% over the past year to $931 million, driven by diversified monetization streams.
Block’s biggest growth catalyst is the continued expansion of Cash App and Square in Africa, Asia, and Latin America. Block is targeting these regions due to their large future total addressable market when internet access becomes widespread. The company has quickly adopted AI, building on its extensive use of machine learning, to accelerate adoption in its core markets as well.
Furthermore, Yahoo Finance reports 37 analysts with a mean price target of $86.15, ranging from $60.00 to $110.00. Most notable firms also affirm and maintain an outperform rating. Block’s embrace of new technology in new markets will drive significant future growth in the expanding fintech industry.
Salesforce (CRM)
Salesforce (NYSE:CRM) provides cloud-based CRM software solutions for businesses of all sizes and types. Salesforce strives to lower costs, save time, and build the best consumer relationships.
On a year-to-date basis, CRM stock is up 62%, with 42 analysts predicting a 12-month median price of $241 per share.
The global customer relationship management market was valued at $64.41 billion in 2022 and is predicted to reach $157.53 billion, growing at a 12% CAGR through 2030. This rapid growth stems from businesses prioritizing customer-centric strategies. Technological advancements have revolutionized Salesforce, making it more accessible and scalable with cloud computing, AI, and data analytics firms.
Since 2013, Salesforce has posted strong financials, exemplified by a 10-year CAGR of 25.77%. In FY23, Salesforce achieved exceptional operational performance with a 35% levered free cash flow margin, surpassing the sector median, and $31 billion in revenue. This demonstrates Salesforce’s superior profitability and cash flow production, providing a better option than its sector rivals.
Salesforce’s key catalyst for long-term growth is its AI technology, Einstein AI. This technology was developed through partnerships with OpenAI and Google Cloud over the past eight years. Einstein AI will enhance CRM platforms by integrating generative and personalization AI capabilities into the world’s leading CRM platform. Einstein GPT enables AI-created content across various domains at a massive scale.
Salesforce’s technologies can rapidly and substantially impact the financial performance of businesses when effectively implemented. The integration of AI will only further amplify this fundamental influence and in turn cause Salesforce to grow.
CRM stock is a promising investment opportunity because of its strong financial performance and innovative AI-based offerings.
Unity Software (U)
Unity Software (NYSE:U) develops game engines used for 2D, 3D, VR, and AR games across various platforms. The company provides a leading platform for creating interactive real-time 3D content, setting itself apart in the game engine sector.
Notably, Unity’s Q1 2023 revenue was $500.3 million, representing an astonishing 56.3% year-over-year increase. Additionally, this result more than doubled the the sector’s median growth rate, and also beat analyst expectations by $20.53 million. Its normalized earnings per share came in at 6 cents, beating out consensus estimates by 9 cents. Finally, Unity’s impressive growth, driven by new services and R&D, is evident in its healthy gross profit margin of 67.7% (over the past 12 months).
The software giant has recently gained traction from its newly announced app development partnership with Apple’s (NASDAQ:AAPL) Vision Pro headset during Apple’s Worldwide Developers Conference. Unity Enterprises cements Unity’s RT3D leadership, and its Apple partnership demonstrates its focus on VR and AR game development.
Additionally, the consensus among analysts is that U stock is a moderate buy, with average upside of 9.28% over the next year. Thus, with robust growth, R&D progress in VR and AR gaming, and a key Apple partnership, U stock is one with trillion dollar potential worth watching.
On the date of publication, Michael Que did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
