Apple could lose its lead over the next 3 years to 3 stocks with extraordinary growth potential. Find out which stocks could outperform Apple and why.
Apple is the most valuable company in the world, but according to experts, these 3 shares could be worth more within 3 years.
Despite the launch of the iPhone 16 and forecasts to grow revenues at a compound annual growth rate (CAGR) of 5% and earnings per share (EPS) at a CAGR of 10% through 2026, Apple could face significant challenges. Bernstein and Raymond James confirmed their “Outperform” ratings on the stock with a target price of $240 and $250 respectively, predicting a performance in line with market consensus, but suggesting a conservative guidance for the fourth quarter.
- Apple weekly graph
- Source: Tradingview
Slowing iPhone sales due to challenging macroeconomic conditions and increasing competition could prevent the company from maintaining its current price-to-earnings ratio of 35 and price-to-sales ratio of 9.
Faced with these challenges, the following 3 actions may be more promising.
1. Nvidia
- Nvidia weekly graph
- Source: Tradingview
Nvidia (NASDAQ, NVDA) has shown impressive growth thanks to its dominant role in the data center and artificial intelligence chip market. Currently, the company has a market capitalization of approximately $2.565 billion and a price-to-sales ratio of 28. Analysts estimate a revenue CAGR of 46% and EPS of 53% over the next three years, significantly higher than those of Apple.
Nvidia’s incredible growth is fueled by the growing demand for artificial intelligence solutions and its ability to provide the best tools for this technological revolution. Selling high-end chips for data centers and artificial intelligence businesses is the company’s main source of revenue. With the increasing adoption of AI across various industries, Nvidia’s growth prospects are extraordinary.
Recently, analysts at Piper Sandler reaffirmed their “Overweight” rating for Nvidia shares, raising their price target from $120 to $140, based on strong expectations ahead of the July quarter earnings report and forecasts for the October quarter. The launch of the Blackwell architecture scheduled for October is considered a key factor in a new phase of growth for Nvidia. Piper Sandler analysts expect high demand from cloud providers, businesses, and governments. Additionally, NVDA could exceed expectations of more than $2 billion in revenue for the July quarter, thanks to improved network services.
Loop Capital also revised its target price upwards from $120 to $175: according to analysts, the company has the potential to significantly exceed revenue and earnings estimates for fiscal 2026. Nvidia’s strong presence in the automotive sector, with its chips for autonomous vehicles and assisted driving solutions, opens up further market opportunities.
If the company maintains these growth trajectories, its market capitalization could reach $5.3 trillion by fiscal 2027, significantly surpassing that of Apple.
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2. Microsoft
- Microsoft weekly graph
- Source: Tradingview
Microsoft (NASDAQ, MSFT) is another tech giant with a current market capitalization of approximately $2.916 trillion and a price-to-sales ratio of 14. Analysts expect a revenue CAGR of 15% and EPS of 17% over the next three years, driven primarily by its cloud businesses and the integration of generative AI tools. The company founded by Bill Gates is considered the favorite in the race to profit from artificial intelligence, thanks to its close partnership with ChatGPT.
Microsoft’s cloud platform, Azure, is one of the company’s key growth drivers, along with Office 365 productivity services and Dynamics customer relationship management services. Furthermore, the strategic partnership with OpenAI has allowed Microsoft to integrate generative artificial intelligence tools into its services, further increasing its appeal in the market.
Revenue diversification and expansion into the emerging fields of artificial intelligence and cloud computing put Microsoft in an advantageous position over Apple. With steady growth and continued innovations, Microsoft’s market capitalization could reach $4.5 trillion by fiscal 2026, making it one of the most valuable companies in the world.
In the fiscal third quarter of 2024, Microsoft reported revenue of $61.9 billion, beating forecasts of $1.01 billion, and earning earnings of $2.94 per share, 11 cents above estimates. Analysts expect that for the fourth quarter of 2024, to be released on July 30, Microsoft will generate revenue of $64.4 billion with earnings of $2.93 per share. In light of these numbers, Deutsche Bank confirmed its “Buy” rating and a target of price of $475, which implies a potential upside of 12% within a year.
3. Alphabet
- Alphabet weekly graph
- Source: Tradingview
Alphabet (NASDAQ, GOOG, GOOGL), Google’s parent company, currently has a market capitalization of approximately $1.9 trillion and a price-to-sales ratio of 7. Analysts estimate a revenue CAGR of 11 % and EPS of 20% over the next three years, thanks to strong growth in its advertising and cloud businesses.
The majority of Alphabet’s revenue comes from digital advertising, including search and display ads, the ad network, and YouTube. However, its Google Cloud division is growing at a much faster pace than its core advertising business, positioning Alphabet as a key player in the cloud computing market.
The adoption of generative AI tools across Alphabet’s Gemini platform is improving the efficiency and attractiveness of its advertising and cloud offerings. If Alphabet continues to maintain these growth rates and its price-to-sales ratio aligns with Microsoft’s, its market capitalization could nearly reach $6 trillion within the next three years, far surpassing that of Apple.
Although some analysts worry that the second half of the year could be uphill, due to a slowdown in search and YouTube, analysts at Citi raised their price target for the stock from $190 to $212 , while JP Morgan analysts increased their target from $200 to $208 .
|DISCLAIMER
The information and considerations in this article should not be used as the sole or primary basis for making investment decisions. The reader maintains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk propensity and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to the public for savings.|
Original article published on Money.it Italy 2024-07-29 16:45:00. Original title: 3 azioni che potrebbero valere più di Apple entro 3 anni
