Tech stocks have been out of favor with the market lately, but they won’t stay that way forever. The technology sector remains the single-best starting point for investors looking for companies that can deliver explosive long-term returns. And tech-heavy Nasdaq Composite With the index down 33 percent from last year, you don’t have to look hard to find tech companies at significant discounts compared to previous highs.
Still, investors benefit from backing the best. Here’s why these three companies stand out as my favorite tech stocks for 2023.
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1. Amazon
Macroeconomic headwinds are pressing. AmazonS (AMZN -0.95%) The e-commerce and profit-driving cloud services segment will lead to a slowdown in growth, but market trends have lowered the company’s stock to attractive levels. With the company’s stock now down 55% from its peak, Amazon is worth less than 1.7 times this year’s projected sales, and I believe investors have an opportunity to buy one of the world’s best companies at a great price.
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While high inflation, rising interest rates and the potential for a broader economic downturn may continue to weigh on Amazon in the near term, the tech giant is remarkably well positioned for long-term success.
The company’s massive investments in building scale and resource advantages in the e-commerce space will keep competitors from disrupting its leadership position in the category, and advances in robotics, factory automation and autonomous supply should help the segment achieve improved margins. In the following years.
In the meantime, Amazon Web Services’ cloud computing division should continue to enjoy strong growth and strong operating income against a macroeconomic backdrop. Amazon’s fast-growing digital advertising business is rapidly gaining market share, and the company has repeatedly demonstrated that it can integrate into new product and service categories by driving meaningful innovation.
2. Cloudflare
Internet connectivity is becoming increasingly important to businesses and organizations, and services being compromised or inaccessible can cause significant damage and missed opportunities. Between content-delivery-network services, cybersecurity offerings, and other foundational web technologies; CloudflareS (NET 0.60%) A suite of software helps websites and applications deliver fast performance and stay online.
Cloudflare’s services are easy to use, flexible and scalable, and the business continues to grow at an encouraging clip. The company’s revenue grew 47 percent year-over-year to $253.9 million in the third quarter, and the business posted a better operating income of $14.8 million for the period.
At the moment, Cloudflare is focused on providing stellar sales growth, but the company is confident that it can significantly increase its profit margin over time. Last quarter’s 76% gross profit and the high demand for its services, Cloudflare seems to be more than capable. Marketing costs represent the smallest portion of revenue to deliver consistent profits and strong sales growth.
3. CrowdStrike
In the year While macroeconomic headwinds will continue to shape much of the broad employment backdrop in 2023, high demand for cybersecurity services is a safe bet. CrowdStrikeS (CRWD 1.16%) The software prevents endpoint hardware, including computers, mobile devices and servers, from being used by cybercriminals as portals to breach networks. Simply put, these aren’t the kind of defenses that businesses and institutions can afford to skip — and the worrisome threats posed by rising cyber threats are helping CrowdStrike record sales growth.
The cybersecurity specialist grew sales 53% year-over-year to reach $580.9 million, and the business continues to record impressive gross profit. CrowdStrike’s continued sales momentum and 78% increase in its subscription services helped it achieve a GAAP (adjusted) gross margin of $96.1 million in adjusted net income, a 134% increase over the prior quarter.
Aided by an expanding product roadmap, new product initiatives and untapped cloud security services, CrowdStrike expects its total addressable market to reach $158 billion by 2026 – up from $76 billion in 2023. Against the backdrop of the cyber security space, the business seems to have a very good chance of maintaining very strong sales growth for many years to come.
With industry-leading products, a promising revenue and earnings outlook, and a stock price down 64 percent from its peak, CrowdStrike now offers attractive value to investors.
John McKee, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of the Motley Fool’s board of directors. Keith Noonan has positions in Cloudflare. He has a spot in the Motley Fool and recommends Amazon.com, Cloudflare, and CrowdStrike. The Motley Fool has a disclosure policy.
