Where can investors look for growth in 2023?
With economists around the world dialing back economic growth forecasts for 2023, it may become increasingly difficult for investors to find reliable growth stocks to buy. Despite the Federal Reserve’s best efforts, inflation remains far higher than the central bank’s goal of 2%. Amid growing fears surrounding rising interest rates and the possibility of a U.S. recession, value stocks have outperformed growth stocks over the past year. The recent weakness will likely prove to be a long-term buying opportunity for top growth stocks, but stock selection is critical. Here are 10 of CFRA Research’s top growth stock picks heading into 2023.
Apple Inc. (ticker: AAPL)
Apple produces the iPhone and other high-end consumer electronics devices. It is also one of the most financially sound blue-chip companies in the world, generating $94.6 billion in net income in 2021. Apple may not be the high-growth stock it once was, but the company still reported 8.1% revenue growth in the most recent quarter. Analyst Angelo Zino likes Apple’s high customer retention rates, massive global ecosystem and expanding addressable market. Zino is also bullish on the company’s aggressive buybacks and management team. CFRA has a “buy” rating and $165 price target for AAPL stock, which closed at $142.16 on Dec. 9.
Microsoft Corp. (MSFT)
Microsoft is the world’s largest software company that is best known for Windows, Office and Azure cloud services. Even at a nearly $2 trillion market capitalization, Microsoft is still putting up some impressive growth numbers. In the fiscal first quarter, Microsoft’s revenue was up 11% overall, including 20% growth in Intelligent Cloud revenue. Analyst John Freeman says Microsoft’s transition to a cloud-based business model has been a tremendous success, and revenue from its cloud business now makes up about two-thirds of the company’s overall earnings. CFRA has a “strong buy” rating and $330 price target for MSFT stock, which closed at $245.42 on Dec. 9.
Amazon.com Inc. (AMZN)
E-commerce and cloud services giant Amazon has been one of the best-performing growth stocks of all time. Unfortunately, Amazon shares are down 46.6% in 2022 through Dec. 9, as revenue growth slowed to 14.7% in the third quarter. Analyst Arun Sundaram says investors may be disappointed with Amazon’s earnings growth in the next year, but the company’s investments in productivity, cost management and high-margin businesses such as cloud services and advertising have Amazon positioned for a long-term profit growth turnaround. Sundaram expects Amazon’s revenue growth to slow to 8% in 2023. CFRA has a “buy” rating and $152 price target for AMZN stock, which closed at $89.09 on Dec. 9.
Tesla Inc. (TSLA)
Tesla is the leading U.S. electric vehicle manufacturer. Tesla reported 55.9% revenue growth in the third quarter. Tesla’s share price is down 49.2% this year through Dec. 9, however, which is the worst performance of any stock on this list. Some of the selling pressure came from Tesla CEO Elon Musk, who has unloaded more than $19 billion worth of Tesla stock in 2022. Analyst Garrett Nelson says Tesla’s new factories in Texas and Germany have the company positioned to continue to grow in 2023 and beyond. CFRA has a “strong buy” rating and $300 price target for TSLA stock, which closed at $179.05 on Dec. 9.
Alphabet is one of the world’s largest online search and advertising companies and the parent company of Google and YouTube. In the third quarter, Alphabet reported 6.1% revenue growth, which included 38% cloud revenue growth. Zino says Alphabet has an attractive valuation compared to other large-cap tech stocks. In fact, Alphabet’s forward earnings multiple of 18 is the lowest on this list. Zino says Alphabet has tremendous cash flow potential and can sustain between 7% and 11% annual revenue growth in the long term. CFRA has a “buy” rating and $120 price target for GOOG stock, which closed at $93.07 on Dec. 9.
Visa Inc. (V)
Visa is a global credit card leader and owner of the world’s largest electronic payment network. Analyst David Holt says Visa’s diversified exposure to different payment categories helps the company generate sustainable revenue and earnings growth even during economic downturns. Visa reported 18.7% revenue growth in the most recent quarter. Holt says Visa generates high returns on capital, and it has additional growth potential in adjacent verticals, such as analytics, security and cryptocurrency. Holt projects 8.5% revenue growth for Visa in fiscal 2023. CFRA has a “buy” rating and $255 price target for V stock, which closed at $208.70 on Dec. 9.
Nvidia Corp. (NVDA)
High-end semiconductor maker Nvidia has been one of the most spectacular growth stories in the entire stock market over the past 15 years. Unfortunately, Nvidia shares have pulled back significantly from their all-time highs and its growth has dried up. In the most recent quarter, Nvidia’s net income dropped 72.4% and its revenue declined 16.5%. Zino says Nvidia is a major supplier for several high-growth markets, including the metaverse, artificial intelligence and cloud computing. He projects that Nvidia’s revenue growth will rebound to 13% in fiscal 2024. CFRA has a “buy” rating and $200 price target for NVDA stock, which closed at $170.01 on Dec. 9.
Home Depot Inc. (HD)
Home Depot is the leading North American home improvement retailer. The home improvement business boomed during the pandemic in 2020 and 2021 thanks to historically low mortgage rates and a surge in improvement projects. While mortgage rates have risen significantly in 2022, analyst Kenneth Leon says Home Depot will continue to benefit from families opting to stay in their current homes, driving demand for do-it-yourself projects. Each of the company’s departments reported positive year-over-year comparisons in the most recent quarter, and Home Depot’s overall revenue growth was 5.6%. CFRA has a “buy” rating and $350 price target for HD stock, which closed at $320.48 on Dec. 9.
Mastercard Inc. (MA)
Like Visa, Mastercard is a leading credit card provider and technology-focused payment network. Holt says Microsoft’s volume-driven business helps insulate the company from inflationary headwinds and changes in consumer preferences. He says Mastercard’s massive scale, exposure to high-growth tech trends and capital-light business model will help the company improve operating leverage and generate long-term upside for investors. Holt says the ongoing global shift from cash and checks to digital payments will help Mastercard sustain revenue growth in the high teens percentage range through at least 2024. CFRA has a “buy” rating and $395 price target for MA stock, which closed at $348.83 on Dec. 9.
McDonald’s Corp. (MCD)
McDonald’s is the world’s largest fast food company. After reporting 20.9% revenue growth in 2021, McDonald’s revenue growth has dropped into negative territory in the past two quarters. Fortunately, the company’s same-store sales were up 9.5% in the quarter, and analyst Siye Desta says the company’s recent investments in mobile ordering and delivery will serve as tail winds for digital sales growth. Desta says inflationary pressures may also drive restaurant customers to more value-oriented offerings, potentially leading to market share gains for McDonald’s. CFRA has a “buy” rating and $280 price target for MCD stock, which closed at $272.04 on Dec. 9.
10 best growth stocks to buy for 2023:
— Apple Inc. (AAPL)
— Microsoft Corp. (MSFT)
— Amazon.com Inc. (AMZN)
— Tesla Inc. (TSLA)
— Alphabet Inc. (GOOG, GOOGL)
— Visa Inc. (V)
— Nvidia Corp. (NVDA)
— Home Depot Inc. (HD)
— Mastercard Inc. (MA)
— McDonald’s Corp. (MCD)
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10 Best Growth Stocks to Buy for 2023 originally appeared on usnews.com
Update 12/12/22: This story was previously published at an earlier date and has been updated with new information.
