In the stock market, a seismic shift is underway—a combination of three stocks may challenge the status quo of the current Magnificent 7. While tech giants have long dominated the market spotlight, the emergence of three solid contenders signals a new era of return-generating opportunity.
With shaking milestones, innovative product suites, and strategic acquisitions, these underdogs are poised to disrupt the established hierarchy and capture the logical sense. From the first one’s record-breaking revenue to the second one’s exponential growth and the third one’s strategic diversification efforts, the stage is set for riveting returns.
Read more to learn the fundamentals behind these companies and explore how they’re rewriting the playbook for market edge in the application software and energy sectors.
Adobe (ADBE)
Adobe’s (NASDAQ:ADBE) constant topline growth represents its strong market position, edgy offerings, and strategic moves. The company scaled in Q4 2023, a milestone with its first-ever $5 billion quarter. The company hit revenue of $5.05 billion, growing at 13% YoY. In the same direction, Adobe’s 2023 revenue of $19.41 billion is labeled with a 13% annual growth rate.
Beyond Adobe’s topline, its composition integrates the strength and diversity of its business segments. For instance, the digital media segment (creative cloud and document cloud offerings) continues to be a primary revenue driver for Adobe. In Q4, digital media revenue hit $3.72 billion, with solid growth of 14% year-over-year. Within this segment, creative revenue amounted to $3 billion, growing by 12% year-over-year. Meanwhile, Document Cloud revenue reached $721 million, suggesting a 17% year-over-year increase.
Fundamentally, Adobe’s lead in the digital media segment may be based on several factors. Firstly, the company’s Creative Cloud suite remains the industry standard. Especially for creative professionals, small businesses, and enterprises. Similarly, Adobe’s ongoing investment in product advancements is coupled with its rapid pace of AI model development. This empowers users to create and monetize content more extensively.
Beyond the digital media segment, Adobe’s experience in cloud business also solidified its revenue growth. In Q4, Experience Cloud revenue reached $1.27 billion, with subscription revenue growing by 12% year-over-year.
Looking ahead, Adobe’s topline targets for fiscal 2024 suggest confidence in continued growth momentum. The company expects total revenue to range from $21.30 billion to $21.50 billion. This is based on solid performance across its Digital Media, Document Cloud, and Experience Cloud segments. Overall, Adobe’s ability to constantly boost revenue growth suggests its market lead and strong valuation potency.
Salesforce (CRM)
Salesforce (NYSE:CRM) product adoptions and related growth serve as a vital basis to justify and enrich its valuations. The remaining performance obligations (RPO) revenue under contract is $48.3 billion (Q3 fiscal 2024). The 21% year-over-year growth reflects strong demand for Salesforce’s products and services, providing revenue visibility for upcoming quarters.
At its core, Salesforce’s focus on AI and data cloud innovation has driven customer adoption and revenue growth. The Data Cloud platform suggests solid performance, ingesting 6.4 trillion records in Q3, a 140% year-over-year increase. Additionally, the introduction of Einstein GPT Copilots has garnered considerable customer interest. For instance, 17% of the Fortune 100 are now Einstein GPT Copilot customers despite the relatively new product. This rapid adoption implies Salesforce’s capability to capitalize on evolving market demand.
Moreover, Salesforce’s high level of customer engagement can be observed in its hosting of 450 customer events and strong participation in initiatives like Dreamforce, highlighting its customer-centric approach. Moreover, the company’s focus on AI-driven chatbots and internal AI deployment suggests further value delivery in its offerings to derive customer satisfaction.
Furthermore, Salesforce’s lead in securing multi-cloud deals, where customers adopt multiple Salesforce Cloud products, demonstrates the strength of its product portfolio. For instance, nine of the top 10 deals in Q3 included six or more clouds. Thus, it suggests the integrated solutions and value proposition Salesforce offers across various business functions and verticals.
Finally, Salesforce’s strategic partnerships, such as those with Amazon (NASDAQ:AMZN) and global management consulting firms like Bain & McKinsey, may continue to support its valuation growth trajectory.
Exxon Mobil (XOM)
Exxon Mobil’s (NYSE:XOM) portfolio solidity and strategic investments are vital fundamentals boosting valuation expansion potential. Solidifying its portfolio in recent years with the divestment of $4 billion of non-core assets and executing two strategic acquisitions, ExxonMobil is poised for value-enhancing growth through access to new opportunities and higher-margin unconventional resources.
The first acquisition accelerates the company’s low-carbon solutions. Meanwhile, the other transforms its upstream business. For instance, the acquisition of Denbury for $4.8 billion in ExxonMobil stock boosts the company’s carbon capture and storage position. This acquisition provides access to a large CO2 pipeline network and storage sites.
On the other hand, the company’s lead in the lithium business with MobilTM Lithium targets to supply lithium for the booming battery and electric vehicle markets. The company may supply lithium for nearly one million electric vehicles annually by 2030. ExxonMobil’s focus on portfolio optimization and strategic investments pushes it to the edge of growth in emerging markets and industry trends. These acquisitions in low-carbon solutions and lithium suggest the company’s focus on diversification and prolonged growth in clean energy technologies.
Moreover, ExxonMobil attained a $9.7 billion cumulative structural cost savings in 2023 compared to 2019, exceeding its initial target. The company plans to deliver accumulated savings totaling $15 billion through 2027. The company’s edgy approach to costing includes leveraging tech, optimizing supply chain efficiency, and improving maintenance.
Finally, the company has a solid record of ascending dividends, with a 4% increase declared in Q4. This is marking 41 years of dividend growth (back-to-back). Also, ExxonMobil’s debt-to-capital ratio was at 16%, and its net debt-to-capital ratio stood at 5%. Therefore, this suggests a strong balance sheet and flexibility to support distributions and strategic investments.
On the date of publication, Yiannis Zourmpanos did not hold (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.
