Over the previous decade, there have been few stocks that have outperformed Tesla (TSLA -3.00%). With intense investor optimism and fast top-line expansion, the electric vehicle maker now has a market value of more than $1 trillion, making it one of the world’s most valuable firms.
It can be useful to study the formula for a stock like Tesla, or any of the tech giants, in order to discover how they reached such high market values.
To reach a market value of over $1 trillion in the next decade, a firm must fulfill three simple requirements:
- A revenue base that is already in the billions.
- A large total addressable market.
- A track record of quick, top-line growth.
Airbnb and Coupang fit the bill perfectly. Here is why they could be worth more than Tesla by year 2030.
1. Airbnb: Redefining travel
Airbnb is a marketplace for people to rent out their houses to visitors. These can range from Beverly Hills mansions to treehouses in Australia’s rainforest, allowing guests to stay at unique locations not available through hotels. Brian Chesky, along with two others, began the company in 2008, and it has exploded since then. Airbnb now has a market capitalization of $105 billion.
By 2021, the platform had 300 million night reservations and experiences secured, up 56% from the prior year, as the world gradually recovered from COVID-19. However, nights booked are still down 8% from 2019; therefore travel has yet to fully recover throughout the world. Revenue was $6 billion in 2021, up 77% year over year, and adjusted earnings before taxes, depreciation, interest, and amortization (EBITDA) were about $1.6 billion. Even while it was facing a headwind from the epidemic,
Airbnb fulfills two of the three criteria, and its revenue is enormous. But what about the TAM? The travel and tourism business is one of the world’s foremost industries, with a worldwide value of $9.2 trillion in 2019 (the previous two years were lower owing to the pandemic). Airbnb currently serves a tiny portion of the market; however, it faces significant competition from hotels and other travel sites like Booking.com and VRBO. However, because each year trillions of dollars are spent by consumers, Airbnb’s annual earnings have a huge ceiling.
I believe Airbnb has a good chance to hit a market capitalization of $1 trillion by 2030 with its strong track record of development, huge market potential, and high profit margins.
2. Coupang: The Amazon of South Korea
Coupang is an e-commerce firm in South Korea that operates similarly to Amazon. It has a wide range of goods and its own fulfillment and delivery network, giving it an edge over competitors. This has helped Coupang to quickly increase market share in South Korea, from 7.4% in 2017 to 15.7% last year. Coupang also offers a premium subscription service that’s called Rocket WOW with free shipping and additional benefits, similar to Amazon’s Premium program
Last year, Coupang generated $18.4 billion in sales, up 54% from the previous year. It still has room to expand within its home market, as you can see from its market share figures. To have a chance of becoming a trillion-dollar firm, it will have to continue to grow. Fortunately, it already has several projects in place to make this happen. First and foremost, it is launching an advertising company and streaming video (similar to Amazon) on top of its e-commerce platform that it hopes will increase spending and profit margins. Second, it is extending into non-e-commerce industries such as food delivery and grocery. Third, it intends to expand to Singapore, Taiwan, Japan, and possibly other areas in Southeast Asia.
Coupang and Airbnb are similar, as both sites offer low margins, producing less than $3 billion in gross profit last year. This suggests that by 2030, Coupang will need to have a significantly larger revenue base in order to achieve a market capitalization of $1 trillion. However, with close to $20 billion in sales currently, steady market share gains, new company initiatives, and overseas expansion under its belt, I think Coupang has the potential to expand its top line at a rapid rate for an extended period of time.
Both Coupang and Airbnb appear to have a chance of reaching a market cap of $1 trillion, but there are hazards with all investments. Nothing is guaranteed in the stock market, and if you invest in either of these stocks, you can’t expect to be above average over the next decade. However, both firms presently display promise that merits consideration.
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