Is this stock worth buying before it joins the trillion-dollar market cap club?

Stocks with a market capitalization of $1 trillion (or more) tend to attract more investors than their small-cap counterparts. There are a few reasons. First, these companies are usually well-established players with a proven track record and significant influence in their industries.

In addition, large-cap companies often have greater access to capital markets, making it easier to raise funds for expansion, acquisitions, and innovation. Their size and resources allow them to weather economic downturns better than smaller companies.

Tech titans like Apple (AAPL), Meta Platforms (META), Nvidia (NVDA), Alphabet (GOOGL), and Microsoft (MSFT) are now valued at more than $1 trillion. CNBC Mad Money host Jim Cramer recently said he believes Eli Lilly (LLY) and Walmart (WMT) will soon join the $1 trillion market cap club. Let’s find out why.

Eli Lilly shares

Eli Lilly (LLY), valued at $764.3 billion, is a biopharmaceutical company with a long history of innovation and expansion. The company has several successful drugs on the market that treat diabetes, psoriasis and other conditions and has generated significant revenues, which have boosted the company’s finances.

In addition, its blockbuster weight-loss drugs, Mounjaro and Zepbound, have piqued the interest of investors and Wall Street.

Eli Lilly shares are up 43.3% year-over-year, while the S&P 500 ($SPX) is up 16.5%.

Eli Lilly’s solid pipeline, successful product launches, and strategic acquisitions have resulted in impressive growth over the years, increasing its overall market value. The company has a huge opportunity in the weight loss market, which is expected to be worth $82.8 billion by 2032. The company is also developing treatments for Alzheimer’s, cancer, and other autoimmune diseases.

Cramer notes that Eli Lilly’s diabetes and weight-loss drugs are in high demand. They also have the potential to be used in a variety of other conditions, including cardiovascular and liver disease.

Recently, the Food and Drug Administration (FDA) approved Lilly’s Alzheimer’s drug, Kisunla, for adults with early-stage Alzheimer’s disease (AD). Cramer believes the Alzheimer’s drug could be a huge success for the company.

Lilly’s first-quarter revenue rose 26% to $8.7 billion, and profit rose 59%. Mounjaro, Zepbound, Jardiance (used to treat diabetes) and Verzenio, an oncology drug, contributed to the results.

Analysts expect Lilly’s earnings to grow by 117% and 38.4% in 2024 and 2025, respectively. Lilly’s products have already been very successful. In addition, the company’s commitment to bringing new drugs to market makes me believe that the company will continue to grow in the coming years, eventually joining the $1 trillion club.

Of the 21 analysts covering LLY stock, 18 rate it a “Strong Buy,” one a “Moderate Buy,” and two a “Hold.” The average price target of $914 suggests the stock has the potential to rise 10.8% above current levels. However, the high price target of $1,100 implies a potential upside of 33.4% over the next 12 months.

Walmart stock

Walmart (WMT), founded in 1962, is a well-known global retail giant. Over the past few decades, Walmart has grown to become the largest retailer by revenue, with a market capitalization of $552.1 billion. It operates thousands of stores in various formats around the world and is known for its consistently low prices.

Compared to the broader market, WMT shares have performed remarkably well, up 31.1% year-over-year.

Walmart began as a single discount store and has since grown into a massive chain of hypermarkets, supermarkets, and members-only warehouse clubs. It operates some 10,500 stores and clubs in 19 countries around the world. This vast global reach is Walmart’s economic moat and the reason for its unrivaled position.

Jim Cramer believes Walmart’s growth strategies, such as loyalty programs, will help the company “double its value over the next few years.”

Walmart’s “Everyday Low Price” strategy has proven successful, driving steady revenue and profit growth even in challenging times. In fiscal 2024, the company’s revenue rose 6% to $648.1 billion, while adjusted earnings rose 5.7% to $6.65 per share.

Walmart recently announced its decision to acquire VIZIO for $11.5 billion in cash. The company intends to use Vizio’s SmartCast operating system (OS) to connect with customers through “innovative TV, home entertainment, and media experiences.”

Walmart has also partnered with Symbotic, an AI-powered robotics and software platform, to automate the supply chain process across all 42 of its U.S. distribution centers. It also has an 11% stake in Symbotic. This advanced logistics and inventory management system will save the company money while increasing its profits.

By investing in growth and acquisition strategies, Walmart has maintained its debt-to-equity ratio at a low 0.49. Walmart is also the Dividend King, increasing its dividend for the past 51 years. This includes a recent quarterly dividend increase of 9%. Walmart pays a 1.2% forward yield and has a manageable payout ratio of 33.4%, leaving room for dividend growth.

Analysts predict that Walmart’s revenue will grow steadily over the next two years, with revenue and earnings expected to grow by 4.6% and 9.3%, respectively, in fiscal 2025. Additionally, revenue and earnings are expected to grow by 4.06% and 9.9%, respectively, in fiscal 2026.

Walmart’s dominant market position, strategic growth initiatives, and global expansion plans lead me to believe the company’s position in the retail industry is secure. Walmart is poised to join the $1 trillion market cap club in the next few years.

Overall, Wall Street is bullish on Walmart stock and rates it a “Strong Buy.” Of the 31 analysts covering WMT stock, 24 recommend a “Strong Buy,” four rate it a “Moderate Buy,” and three suggest a “Hold.” The average price target of $73.43 suggests a potential upside of 6.5% from current levels. However, its $82 market price estimate suggests a potential upside of about 18.9% over the next 12 months.

On the date of publication, Sushree Mohanty did not hold (directly or indirectly) a position in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information, please refer to Barchart’s Disclosure Policy here.