The stock market faced numerous hurdles in the year 2022 due to the impact of high inflation and rising interest rates. This resulted in the S&P 500 and the Nasdaq Composite falling into bear market territory, which led to widespread concern among investors.
A bear market refers to a market where the prices of securities are declining, and investor confidence is low. In such times, investors are often faced with difficult decisions about what to do with their investments.
A Glance at History
However, history provides a beacon of hope during such trying times. Every bear market in the United States has eventually given way to a bull market, providing investors with an opportunity to buy great stocks at discounted prices.
A bull market refers to a market in which the prices of securities are rising, and investor confidence is high. This pattern has held true throughout history, and investors can take comfort in the fact that it is likely to happen again.
Two Recommended Growth Stocks to Buy in 2023
In light of this historical trend, it is worth considering growth stocks that have the potential to perform well in the upcoming bull market. In this article, we will examine two such stocks that investors can consider buying in 2023: Cloudflare (NET 3.27%) and Microsoft (MSFT 1.08%). These two stocks have shown remarkable growth in the past and are expected to continue their upward trajectory in the coming years.
Cloudflare: A Business Growing as Quickly as the Internet
Cloudflare started as a content delivery network (CDN), but it has now evolved into a full-fledged provider of application, network, and security services. Operating the fastest cloud network and developer platform in the market, Cloudflare delivers content to 95% of the internet-connected population within 50 milliseconds.
The company’s recent Q3 financial results were impressive, with a customer count increase of 18%, average customer spending up 24%, and revenue rising 47% to $254 million. Cloudflare reported a non-GAAP profit of $0.06 per diluted share, and management expects revenue to grow fivefold in the next five years, implying an annualized revenue growth of 38% through 2027. With a total addressable market (TAM) of $125 billion, Cloudflare is a growth stock worth buying today, especially compared to its three-year average of 41.8 times sales. Currently trading at 20.5 times sales, Cloudflare is reasonably valued for a business growing as quickly as the internet.
Microsoft: A Once-in-a-Decade Buying Opportunity
Microsoft reported disappointing financial results for Q2 2023, with revenue growth of only 2% and a 11% decline in GAAP earnings per diluted share. Despite this, the stock has fallen more than any other point in the past decade and is expected to recover with the economy. Microsoft is the best software seller globally, with a leadership position in several software markets, including Microsoft 365, enterprise resources planning, and cybersecurity. Its Azure platform is steadily gaining market share in cloud computing, making Microsoft the second largest CIPS vendor. Additionally, Microsoft is the seventh largest digital advertising publisher in the world and has a partnership with Netflix to grow in online video advertising.
Investors are advised to capitalize on this once-in-a-decade buying opportunity, as Microsoft is expected to grow its revenues at a double-digit percentage pace annually for the foreseeable future. With a current valuation of 9.4 times sales, Microsoft is an attractive investment for those looking for long-term growth.
The bear market of 2022 presents investors with a unique opportunity to buy great stocks at discounted prices. Both Cloudflare and Microsoft are growth stocks worth buying in 2023, as they offer investors the chance to capitalize on the growth of the internet and software industries, respectively. With solid financials, a bright future, and reasonable valuations, these stocks are poised for long-term growth.
