Investment That Will Boom in 2023

vemuda.com - A growth stock is a business that generates significant and persistent positive cash flow and whose revenues and earnings are predicted to grow at a higher rate than the average company in the same industry.

Growth investing is a type of investing that  aims to increase an investor’s capital. Growth investors usually invest in growth stocks, which are young or small companies with earnings that are predicted to grow at a faster rate than the industry sector or the general economy.

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Growth stocks are frequently overvalued in terms of valuation multiples, but if expectations are met, they can produce  substantial capital gains. These equities outperform their respective markets in terms of growth and can be excellent long-term investments.

Growth stocks are also associated with high  risks. This can result in significant losses if companies fail to meet market growth expectations.

Furthermore, some businesses prioritize  revenue growth at any costs, which can be counterproductive, especially in today’s stock market.

Investors have shifted away from growth equities in recent months, preferring to invest in value firms, which are more resistant to monetary tightening and inflationary economic conditions. This has heightened the bearish momentum in these investments, allowing investors to purchase growth stocks at lower prices.

Growth stocks can be an excellent method to build life-changing riches in the stock market. Of course, knowing which growth stocks to buy and when, is critical.

Therefore, here’s a list of stocks that I think  could potentially grow rapidly by 2023. However, bare in mind that, stocks tend to be unpredicted, and at any given moment, they could  rapidly fall. So be very cautious.

Now, let me tell you why I think these are great stocks to consider.

1. Marvell Technology

Specializes in the design and marketing of integrated communications and storage circuits for high-speed network equipment, hard disk drive, and consumer electronics.

MRVL stock has dropped 33.72% to $59.20  per share since the beginning of the year. This is due to the investors selling the growth stock.

Nonetheless, Marvell just stated that Cloud Data Center Ethernet Switch Port Shipments have more than doubled year over year, achieving a record high market share of 31% in Q4 2021.

Despite its poor performance, Marvell is predicted to develop rapidly in the next two years,thanks to continued demand for its cloud solutions. In 2022, net sales are expected to increase by 50.3% to $4.46 billion,  and then 46.7% to $6.1 billion in 2023.

MRVL’s bottom line, on the other hand, is expected to deteriorate in 2022, with a net loss of $421 million, before solidly rebounding in 2023 to $291 million.

Net margins are expected to rise to 4.76% per year as a result of this improvement, raising the stock price of MRVL. Moreover, the IT firm is well-balanced, with net debt of only $444  million in 2021 and a leverage ratio of 0.48x.

Furthermore, analysts are beyond hopeful on  the growth company, with an average 12-month target price of $91.2, implying a possible gain of 57.59 %.

With a forward EV/EBITDA of 20.4x and a price-to-book ratio of 3.02x, the company’s valuation metrics are stretched.

2. Li Auto Inc.(LI)

Li Auto is a Chinese manufacturer of new energy vehicles (NEVs) that specializes in the design, development, production, and sale of  smart electric vehicles.

The company has lost more than 30% of its value this year to far, falling to $22.12 per share, as investor interest in Chinese IT firms has dwindled as a result of Beijing’s crackdown.

Despite the looming regulatory issues, LI  Auto has grown rapidly in recent years and is projected to do so again. Revenues are expected to increase by 93.2 % to CNY 52.1 billion ($7.86 billion) in 2022, and by 69.2% to CNY 88.2 billion in 2023.

Considering the fact that the company remains unprofitable, with an estimated net loss of CNY 691 million in 2022, analyst forecasts show that it will turn things around in 2023, with a net income of CNY 1.52 billion. 

If the Chinese EV giant sticks to its forecast, the growth stock might go parabolic in 2023, bolstering the firm’s prospects.

Furthermore, with a net cash position  of CNY 10.6 billion at the end of 2021, Li Auto has enough cash on hand to meet its growth targets.

Despite that and even if the stock declined by more than 30 % over the year, LI stock is expensive, exchanging at a massive forward EV/EBITDA of 282x and a 2022e P/B ratio of 3.74x.

Analysts maintain a positive outlook on LI stock, with a target price of $42.24 per share, representing a 96.37 % increase over the current price.

3. Zscaler, Inc. (ZS)

Zscaler is a zero-trust cloud security platform. Year-to-date, ZS stock has dropped 29.94 % to $209.02 a share, making it a more affordable entry point for investors interested in this  fast-growing company.

A research report published earlier this month by the cloud specialist revealed a 400 % spike in phishing assaults on the retail and wholesale industries over the previous 12 months.

ZS’s cloud security products should benefit from these results, allowing the company to maintain its rapid top-line growth. Zcaler’s net sales increased by 56.1 % to $673 million in 2021, a significant increase. Revenues are expected to increase by 56.3 % this year to $1.05 billion, and by 36 % in 2023 to $1.4 billion.

This year’s net loss is expected to be $372  million, up from $262 million last year. Despite this, ZS expects to increase its EBITDA by 28.7% to $139 million this year.  

Furthermore, the company has enough cash to expand its operations, with a net cash position of $589 million at the end of 2021, which is expected to grow by 20.5 % to $710 million in 2022.

Wall Street analysts have given the growth  stock a moderate buy rating, with a median target price of $311.22 per share, representing a 45.41 % potential upside.

However, the cloud security stock is costly, with a projected EV/EBITDA of 202x and a 2022e P/B of 49.8x.

4. Bill.com Holdings, Inc. (BILL)

Bill.com (NYSE:BILL) is a major provider of  cloud-based software for small and medium enterprises that streamlines back-office  financial operations (SMBs).

BILL stock has dropped more than 20% to $182.70 a share since the beginning of the year, despite the difficult market conditions for tech and growth stocks.

Due to poor profitability, market players beat  the growing stock. In 2021, BILL’s net loss was $987 million, but it is predicted to drop to  $308 million this year.

The software company, on the other hand, is rapidly expanding. Revenues are expected to increase by 149.6% to $594 million in 2022, and by another 35.7 % to $806 million in 2023, after increasing by 50.6  % to $238 million in 2021.

Bill.com also has a healthy balance sheet. The company’s net cash position is forecast to  exceed $1.03 billion this year, giving it a large cushion of safety to expand its activities in the next years.

Insiders recently sold a large amount of BILL stock, showing that the firm is overvalued. This is unsurprising considering the company’s high multiples, with a forward EV/revenue of 28.4x and a 2022e P/B of 4.65x.

5. Cloudflare (NET)

Cloudflare (NYSE:NET) is a worldwide cloud  services firm that offers everything from security to software-as-a-service. NET stock has dropped 28.19 % to $90.59 this year, exceeding the collapse in tech stocks.

In the next two years, Cloudflare’s top-line  growth is expected to be steady. Net sales are predicted to increase by 42.1 % this year, to $932 million, and by 32.7 % in 2023, to $1.23 billion.  

The cloud service provider’s bottom line should improve as well. NET expects to cut its annual losses to $189 million this year, down from $260 million in 2021.

Despite this, Cloudflare expects to nearly quadruple EBITDA to $103 million this year, with a 1.35 % positive operating margin.

At the end of 2021, the company had a cash balance of $663 million. With a 2022e EV/revenue of 31.1x and a P/B ratio of 40.2x, Cloudflare’s multiples remain high.  

Besides and even if NET stock is predicted to stay profitless in the next two years, experts are extremely optimistic on the quickly increasing stock, offering an average target in the next 12 months of $153.44 per share, implying an upside of 69.38 %.

6. RingCentral, Inc. (RNG)

RingCentral is a global enterprise cloud communications, video meetings, collaboration, and contact center  software-as-a-service (SaaS) provider.

The stock of RNG has dropped 56.44 % to $83.82 a share since the beginning of the year, putting it at the bottom of  our growth stock ranking.

Despite this, the company has outperformed  profits per share and revenue projections in each of the last four quarters, demonstrating  great execution for this software firm.

RNG is exploding. Following a 34.7 % increase to $1.59 billion in 2021, revenue is expected to rise 26.1 % to $2.01 billion in 2022, and 24.4 % to $2.5 billion the following year.

Nevertheless, the company’s bottom line is predicted to worsen in 2022, with a net loss of $437 million compared to a $376 million loss the previous year.

Furthermore, among our list of growth stocks, RNG is the most leveraged. Despite the fact that RingCentral’s net debt was $1.13 billion  in 2021, reflecting a 5.14x leverage ratio, analysts predict the company’s debt to be  reduced by 10.9 % to $1 billion this year.

Moreover, RNG stock has a premium valuation, with a forward EV/EBITDA ratio of 36.5x and a P/B ratio of 13.1x. Analysts on Wall Street, on the other hand, are bullish on the stock, with an average target price of $211.59 a share, up 152.43 % from today’s closing.

7. Coinbase Global, Inc. (COIN)

Coinbase is a financial technology business  that offers end-to-end financial infrastructure and technology for the cryptocurrency market. COIN stock has dropped over 50% year to date to $122.69 a share, exceeding the consolidation of cryptocurrency assets and growth stocks.

The bitcoin trading platform’s revenues are  predicted to drop 7.7% to $7.23 billion this year, but rise 19.2% to $8.63 billion in 2023.  

Analysts expect COIN stock to post a net loss of $271 million in 2022, following a strong  year in 2021 with a net profit of $3.62 billion and a net margin of 46.2 %. This explains  the sharp drop in its market capitalization. Despite this, COIN stock is a good buy at these prices, as net income is expected to turn  positive in 2023.

Furthermore, Coinbase is well-capitalized, with a net cash position of $3.3 billion in 2021, which is expected to grow strongly this year, rising 47.4% year over year to $4.88 billion.

Analysts also grade the cryptocurrency expert as a moderate buy, with an average target price of $275.70 per share, implying a 125.02 % gain in the next year.

In conclusion, Growth investors are interested in the potential for a company or a market to grow.  

There is no universal formula for assessing  this potential; it necessitates a degree of individual interpretation based on objective and subjective elements, as well as personal opinion.  

Certain approaches or criteria may be used by  growth investors as a framework for their study, but they must be applied with the  following considerations in mind: Its current position in comparison to its previous  industry performance and financial performance.

Well folks, thank you so much for reading. Until next time, take care!