Prospects for Tesla and Meta to Regain Trillion-Dollar Valuations in 2024

Tesla stock

The year 2023 has marked a significant period for U.S. stocks, witnessing a robust post-Fed rally that propelled the S&P 500 Index ($SPX) to its peak levels. Amidst this bullish trend, Nvidia (NASDAQ:NVDA) achieved a groundbreaking milestone by becoming the first chip designer to attain a market capitalization of $1 trillion, courtesy of the pervasive influence of artificial intelligence (AI).

In the recent past, the trillion-dollar club has witnessed dynamic changes. Both Tesla (NASDAQ:TSLA) and Meta Platforms (NASDAQ:META) joined this exclusive league in 2021, only to drop out in the challenging tech stock landscape of 2022. Now, as we approach 2024, there’s speculation about whether these tech giants could reclaim their trillion-dollar market cap status. This article delves into the possibilities.

Tesla’s Potential Return to the Trillion-Dollar Club

Tesla reached its peak market capitalization of over $1.2 trillion in the fourth quarter of 2021, but currently hovers just above $805 billion. To rejoin the coveted trillion-dollar club, Tesla’s shares need to experience a modest increase of about a quarter from their current levels.

Despite initial concerns about electric vehicle (EV) demand and margin compression during a price war, Tesla’s stock has more than doubled in 2023. In contrast to the struggles faced by other EV companies, both startup and legacy, Tesla’s established position in the industry has allowed it to maintain a robust operating margin of around 8%. While challenges persist, especially in the competitive Chinese market, Tesla stands as a strong contender to reclaim its trillion-dollar valuation in the coming year.

Meta’s Bid to Regain Trillion-Dollar Status

Similar to Tesla, Meta Platforms saw its market cap peak in 2021, only to lose its trillion-dollar status later. After a challenging 2022, marked as the worst-performing FAANG stock, Meta has undergone a notable reversal in 2023, emerging as the second-best S&P 500 stock.

Efforts to cut costs, as part of CEO Mark Zuckerberg’s “year of efficiency,” have borne fruit for Meta. The company returned to double-digit revenue growth and demonstrated positive results in the third quarter of 2023. Looking ahead to 2024, Meta’s outlook appears optimistic, particularly with the integration of AI initiatives impacting both the top and bottom lines.

While geopolitical uncertainties pose near-term challenges, Meta’s aggressive shift towards AI positions the company for long-term success. Currently valued at over $850 billion, Meta needs approximately a 16% increase in market capitalization to rejoin the trillion-dollar club. Consensus estimates and a mean target price of $383.22 suggest that Meta could indeed become a trillion-dollar company in 2024.

Despite a current next-12-month price-to-earnings multiple of 19.74x, which may not be overwhelmingly attractive, Meta’s anticipated earnings growth of 22.7% in 2024, coupled with potential rate cuts by the Federal Reserve, could pave the way for Meta to regain its status as a trillion-dollar giant in the upcoming year.

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