5 Mega-Cap Stocks With Room to Run in 2024 | Investing

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The stock market experienced a strong rebound in 2023, riding up 24% after a disappointing performance in 2022. Many companies that performed well in 2023 have extended their rallies into 2024 and look poised for more gains.

Investors seeking a bit of protection and diversification now can buy stocks across various sectors. They can also filter their searches even further by focusing on stocks within specific market-cap ranges. Micro caps, small caps, mid-caps, large caps and mega caps are the available choices. But some investors may be wondering whether several companies with the highest market caps can keep defying gravity.

What Are the Best Buys Among the Biggest Mega Caps?

Only a small number of stocks reach mega-cap status. These stocks have market caps of $200 billion or more. Household names fill this list, such as members of the “Magnificent Seven,” and make up a large percentage of major indexes like the S&P 500 and the Nasdaq-100, not to mention many professionally managed exchange-traded funds, or ETFs.

Some market watchers have questioned whether certain mega-cap stocks can continue their stellar run, considering many turned in remarkable performances in 2023, with several returning more than 100%. But mega-cap companies are deeply ingrained within the global economy, and many of them are still growing. The following mega-cap stocks look well positioned to keep exceeding expectations in 2024:

Mega-cap stock Market capitalization Forward price-to-earnings (P/E) ratio
Alphabet Inc. (ticker: GOOG, GOOGL) $1.7 trillion 17
Nvidia Corp. (NVDA) $2.1 trillion 29
Amazon.com Inc. (AMZN) $1.9 trillion 33
Microsoft Corp. (MSFT) $3.1 trillion 31
Visa Inc. (V) $577.2 billion 25

The search engine giant combines a reasonable valuation with solid growth rates. The stock has a forward P/E ratio of 17 and reported impressive financials in the fourth quarter. In Q4, revenue increased by 13% year over year while net income jumped by 51.8% year over year. Alphabet’s cost-cutting measures have improved margins, which should strengthen its valuation moving forward.

While advertising, the company’s main revenue driver, fell slightly short of expectations in Q4, Google Cloud revenue outpaced estimates by nearly 3%, ballooning from $7.3 billion to $9.2 billion in the fourth quarter. That’s a 26% year-over-year increase. Google Cloud swung to a profit as well, going from a $186 million operating loss in Q4 2022 to $864 million in operating income in Q4 2023.

The company’s “other bets” segment also performed well but is still unprofitable. This segment is a small portion of total revenue and contains Alphabet’s other initiatives to diversify revenue instead of relying on its advertising network.

Alphabet stock has outperformed many stocks and major indexes. Shares are up by 51.8% over the past year as of March 1, and the stock has a 19% annualized return over the past five years. A relatively low valuation and the continued rebound of advertising revenue suggest that the stock can keep growing.

Nvidia is one of the few artificial intelligence stocks with a clear case that it can live up to the long-term hype of this innovative technology. Shares have more than tripled over the past year, and net income surged by 581% in the company’s fiscal 2024. Revenue gained 126% in FY 2024 over the prior year, hitting a company record of nearly $61 billion.

When net income growth outpaces revenue growth, increasing profit margins, it can be easier to justify the valuation. The stock trades at a 29 forward P/E and looks as if it can continue to deliver gains for investors. While its fiscal 2024 net income gain was certainly dramatic, its quarterly net income was up an even more impressive 769% year over year.

Nvidia’s AI chips are second to none, and the company has rapidly expanded its market share, with revenue adding 265% year over year in the most recent quarter. Nvidia CEO Jensen Huang has also offered optimistic guidance about artificial intelligence’s expansion overall.

“Accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries and nations,” Huang stated in the company’s Q4 fiscal year 2024 press release.

Some of the talk about AI stocks relates to what will happen after growth rates decelerate. While some AI stocks look bubbly, Nvidia has achieved net profit margins above 50% for two consecutive quarters. By the time growth slows down, Nvidia’s valuation should look more attractive for investors who buy shares at the current price.

Amazon got its start as an online e-commerce platform, and many people still use the online marketplace to buy products. However, the company has evolved dramatically since those early days and now has exposure to several high-growth verticals.

Amazon investors get exposure to e-commerce, cloud computing, advertising, groceries, artificial intelligence and other industries with a single stock. Those business segments helped the company achieve 14% year-over-year net sales growth to $170 billion in the fourth quarter of 2023.

Domestic and international sales were both up year over year, but international revenue growth outpaced domestic growth. Higher growth rates in international markets suggest Amazon stock has more runway in 2024 and beyond. Amazon Web Services also performed well and notched a 13% year-over-year boost in revenue to $24.2 billion.

The stock has more than doubled over the past five years, but most of those gains are recent. Amazon stock is up by 93.4% over the past year as of March 1. A record-breaking holiday shopping season fueled the stock’s ascent and indicated that the e-commerce marketplace is still growing.

CEO Andy Jassy also expressed excitement about the company’s advances in artificial intelligence through Bedrock, Q and Trainium. These are early-stage projects that can result in higher revenue growth rates in the future.

Microsoft is the world’s most valuable publicly traded company, with a market cap of a little over $3 trillion. The stock is the top holding in the S&P 500 and the Nasdaq-100. Shares are up by 69.9% over the past year as of March 1 and have gains of 30.6% annualized over the past five years.

Microsoft has exposure to many industries, such as cloud computing, PCs, video games, advertising and artificial intelligence. The tech giant’s rising market share in artificial intelligence has gained plenty of attention. The company’s investments in OpenAI, the release of Copilot and a deal with French startup Mistral AI demonstrate a strong commitment to long-term AI goals.

Plus, strong financials give Microsoft the flexibility to pour billions of dollars into artificial intelligence. Microsoft reported 18% revenue growth and 33% net income growth year over year in the second quarter of its fiscal 2024. MSFT stock also has a 0.72% forward dividend yield.

As CEO Satya Nadella noted in the press release accompanying those results, artificial intelligence has already had a significant impact on the company’s business model. “By infusing AI across every layer of our tech stack, we’re winning new customers and helping drive new benefits and productivity gains across every sector,” he stated.

Microsoft Cloud was the big growth driver and contributed to more than half of the firm’s total revenue in Q2. Cloud revenue increased by 24% year over year for the tech conglomerate.

This fintech company has net profit margins above 50% and a strong business model. Visa makes a percentage of every transaction from its credit and debit cards.

The stock offers an opportunity for share-price appreciation while serving as a useful hedge against economic uncertainty. During slower economies, people may stop buying certain goods and services, but they continue to use their credit cards. The company doesn’t generate as much revenue during slowdowns, but it’s impractical for most people to abandon their credit and debit cards. These cards often have enticing rewards programs as well.

Visa had another successful showing in the first quarter of its fiscal 2024. During that quarter, revenue increased by 9% year over year while net income jumped by 17%. Those gains have contributed to the stock gaining 30.7% over the past year as of March 1.

CEO Ryan McInerney remarked in the press release for Q1 results that consumer spending remained resilient. Cross-border volume came in 16% higher year over year, a key business driver that contributed to higher revenue and earnings.

V stock also has a 0.73% forward dividend yield and has maintained a double-digit annual dividend growth rate for several years. Near the end of 2023, Visa hiked its quarterly dividend by 15.6% year over year.

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