3 Cream-of-the-Crop Growth Stocks to Buy for 2023
Growth stocks have been under fire since the bear market began. In fact, the selloff in many of these stocks began well before the overall market peaked. But as time goes on and earnings come out, we’re noticing some of the growth stocks to buy. That is, we’re seeing what the cream of the crop really is.
Years from now, we’re going to wake up and see a number of stocks trading significantly higher than current levels. Will they be the names on this list? For our sake, I sure hope so!
The reality is all sorts of stocks can explode higher during an unchecked bull market. Businesses that have no profits — and some that don’t even have revenue — end up garnering multi-billion-dollar valuations. Eventually, we see which growth stocks are worth owning and which are not.
Let’s have a look.
|The Trade Desk
Growth Stocks to Buy: The Trade Desk (TTD)
As the earnings reports continue to hit, The Trade Desk (NASDAQ:TTD) has proven to be a name that investors want to own. Co-founder and CEO Jeff Green has built one heck of a company — one that continues to generate solid growth amid a very difficult operating environment.
Despite the pressures Meta (NASDAQ:META) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) are seeing, The Trade Desk continues to execute at a high level. The company recently delivered an earnings beat and basically in-line revenue results. Sales grew 24% year-over-year.
To be growing the top line in an environment like this is quite impressive. And then investors remember The Trade Desk is actually profitable, with solid growth and positive free cash flow.
Analysts also expect positive earnings and revenue growth this year and next year, which is nothing to scoff at in this environment. The valuation is a bit rich, but this is one to buy on the dips.
Growth Stocks to Buy: Salesforce (CRM)
For months now, I have been pounding the table on Salesforce (NYSE:CRM). For technical reasons, I wanted the stock to fall just a bit further — down to about $120 — but from a fundamental perspective, it didn’t need to.
In fact, this growth stock became so undervalued, it drew in five activist investors.
Just this week, the company delivered a robust earnings report. Earnings and revenue topped analysts’ expectations, while management’s first-quarter and full-year revenue outlook topped consensus expectations.
Salesforce delivered strong operating margins and announced a fresh $20 billion buyback plan. Clearly it has found its stride.
While the stock has rallied quite a bit off the low, up about 53%, I believe we can look to buy the dips in this name. That’s as shares are still 40% off the high. Shares currently trade at about 30 times this year’s earnings. However, it could be a bargain on a deeper decline as Salesforce cements itself as a top growth stock to own for the long term.
I might end up being wrong about DigitalOcean (NYSE:DOCN), as I have been a bull for the last several months. The growth story may not pan out and margins may erode in the future due to competitive pressure. So far though, the company continues to do pretty well.
The company’s recent earnings report was a top- and bottom-line beat. However, its first-quarter and full-year revenue outlook was slightly below analysts’ expectations. On the plus side, its earnings outlook for both timeframes were above expectations. Particularly for the full-year, management guided for non-GAAP earnings of $1.65 to $1.69 a share vs. estimates of just $1.16 per share.
That’s a massive earnings beat, even if the company did deliver a shortfall on revenue (and it wasn’t by that much.) At a time like this, I would like to know that the companies I own can generate cash flow and profit. Ultimately, that’s what matters, even if growth-stock investors are often willing to sacrifice profits for sales growth.
While the stock has been absolutely trounced, the same can be said for many growth stocks. Despite the beating, I believe DOCN stock has a large long-term opportunity.
On the date of publication, Bret Kenwell held a long position in TTD and DOCN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.