Prediction: 3 Stocks That'll Be Worth More Than Tesla 5 Years From Now

It's an unlikely success story. Indeed, the electric vehicle industry was nearly non-existent when Tesla (NASDAQ: TSLA) began delivering its very first Model S sedans back in 2012. Tesla arguably mainstreamed the movement to become the $1.4 trillion behemoth it is today.

As Tesla did to the market's titans then, though, other companies will be capitalizing on other opportunities in the foreseeable future, eclipsing Tesla's size as a result.

Here's a rundown of three such names that are likely to boast bigger market caps than Tesla within the next five years.

Image source: Getty Images.

1. Berkshire Hathaway

It's been a less-than-stellar year for Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) shareholders, but understandably so. Longtime CEO and resident stock-picking guru Warren Buffett announced in May that he'd be stepping down from the role at the end of this year. Investors are about to find out if they've been betting on the company or the man.

While there's no denying Buffett's genius, rest assured that Berkshire can do just fine -- and even thrive -- under other leadership.

The key is the company's structure. It's one-part mutual fund and one-part private equity firm, but without most of the limiting factors of either type of entity. Mostly though, it's an insurance outfit with enormous flexibility. As Buffett himself explained in detail in 2009's letter to Berkshire shareholders:

Insurers receive premiums upfront and pay claims later. ... This collect-now, pay-later model leaves us holding large sums -- money we call "float" -- that will eventually go to others. Meanwhile, we get to invest this float for Berkshire's benefit. ... This combination allows us to enjoy the use of free money -- and, better yet, get paid for holding it.

Berkshire's management still needs to be smart. After all, it's using its cash cows and stock holding to backstop its insurance business's liabilities. In many ways though, it's this safety-minded, cash-flow-first mindset that's allowed (if not forced) Berkshire Hathaway to buy the high-quality assets that have allowed it to outperform the broad market in the long run.

Incoming CEO Greg Abel understands all of this, and isn't apt to change any of it. The market will certainly see this within the next five years, and reprice what's not been reflected in Berkshire stock's price since early this year.

Also bear in mind that this $1.1 trillion company's still got $382 billion worth of liquidity currently on the sidelines that's waiting to be put to work. Its growth potential isn't being priced in either, even though most of it's almost sure to be invested in something within the next five years.

2. Walmart

With a market cap of more than $800 billion, slow-moving retailer Walmart (NYSE: WMT) has a long way to go before catching up with and then surpassing Tesla, size-wise, even if the electric vehicle brand runs into a competition headwind. Don't rule out the possibility, though.

See, Walmart is a very, very well run company. Although single-digit growth is the norm here, it's consistently and predictably profitable, funding annualized stock buybacks anywhere from $2.5 billion to $10 billion. The company's outstanding share count has been whittled down from more than 13 billion as of 2000 to less than 8 billion now, for perspective, inflating its yearly per-share profits from less than $0.40 to more than $2.60 during this time frame. That's why the stock's price is up a hefty 345% since the end of 1999, or up nearly 600% when factoring in reinvested dividends. It's one of the market's least-celebrated workhorses.

The foreseeable future looks just as bright, too -- if not brighter -- as the word's biggest brick-and-mortar retailer continues to evolve into a lifestyle brand. This wider revenue net includes its foray into digital advertising (via Walmart.com as well as the Vizio smart-television ecosystem), premium private-label consumer goods, and a subscription-based home delivery program that looks a whole lot like Amazon's Prime. Although Walmart itself doesn't disclose the specifics, Morgan Stanley's most recent estimate suggests there are now well more than 20 million paying Walmart+ subscribers.

It may never do anything worthy of a front-page headline. This slow and steady steamroller is going to be nearly impossible to hold back, though.

3. Palantir Technologies

Finally, add Palantir Technologies (NASDAQ: PLTR) to your list of names that may well be bigger than Tesla five years from now.

There was never any doubt that this artificial intelligence (AI)-powered decision-making technology specialist was capable of growing its business. For perspective, its trailing-12-month top line has improved from less than $1 billion in 2020 to almost $3.9 billion now, with comparable growth in the cards for at least the next few years. What was in question was whether or not the company could muster growth that was meaningfully profitable.

That question's been answered this year, and last quarter in particular, when revenue grew 63% year over year, more than tripling operating income.

PLTR Revenue (TTM) data by YCharts

And this is an important nuance to understand about Palantir at this time. Even with the huge growth it's produced this year alone, the stock's valuation is a seemingly outrageous 173 times next year's projected per-share profits of $0.98. It feels like it would/should take more than five years for this $400 billion outfit to come anywhere close to reaching Tesla's current market cap of $1.4 trillion, let alone whatever size Tesla adds in the meantime.

It's not quite as crazy as it seems on the surface, though. As we can now clearly see, Palantir's costs are more fixed than not, meaning they don't grow dollar-for-dollar with revenue -- not even close, in fact. While artificial intelligence software may be costly to initially code, once it's created, it's relatively cheap to deploy, and it can be deployed over and over again at little to no additional expense. That's why the company's profit margins are widening so quickly now.

And the future is promising to be sure. As of the latest look only about one-tenth of U.S. companies are currently utilizing artificial intelligence, which is why Straits Research expects the global decision-making AI software market to grow at an average annual pace of 20% through 2033.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, Palantir Technologies, Tesla, and Walmart. The Motley Fool has a disclosure policy.