Growth stocks tend to outperform the overall market because of their future potential.
This year, the stock markets started weak due to fears that an interest rates hike could slow down the flow of money into speculative investments. Then just two months into the year, Russia invaded Ukraine, and the geopolitical crisis that emerged further weakened the market.
However, the market seems to have factored in all these issues and is slowly bouncing back. As such, this could be a perfect time to start looking into growth stocks that could perform well as the year proceeds.
From the best stocks within the UK to US stocks, there are many good stocks out there that could help you grow your capital throughout the year. This guide will give you all the information you need to get started in your stock investing journey.
Tip: Getting your research done early into which stocks to invest in could help give you the highest ROI!
What Is A Growth Stock?
If you are new to stock investing, then no doubt of course you will want to have a break down and know exactly what a growth stock actually is and how growth stocks operate.
A growth stock in simple terms is basically a company within any field that is anticipated to grow at a much faster and greater rate than other stocks.
You will find that growth stocks or companies, for example, Adobe Inc will reinvest their earnings back into the business to make it grow even greater, this is how companies grow on a larger scale.
And that is the clear definition of what a growth stock actually is.
Another prime and good example is a company which everyone knows, Amazon. Now Amazon is one of the top, largest companies in the world and one of the top 5 companies by market capitalisation.
Market Capitalisation (market cap): Market capitalisation simply means the total market value of a company’s shares on the market. It is a good way for investors when looking to invest to see a company's size, which will intern help make their choice with the risk implications of investing in its shares.
So, to the eye of the investor, this shows that the company in question is a good company to invest in, as it has shown great power and strength within its growth which is what makes it appealing to investors who want to be a part of such growth.
As stated above, any company within a sector can become a growth stock but typically it is the companies who offer something new, different and unique which catches the eye of individuals which intern makes them want to invest and it evolves from there.
But, as you may know, if you are into stock investing or if you are just starting out in stocks and doing your research, be mindful as growth stocks are different to value stocks when looking to invest in.
Value Stocks
Value stocks are companies that are trading below what that company is actually really worth, which in effect means that the return can be higher. Value stocks in comparison to growth stocks are deemed a lower- risk and have less volatility connected to them.
If you are an investor or you are a beginner to investing and may not wish to take greater risks at the start, value stocks are going to be better suited for you until the day comes that you are ready for the new adventure into growth stocks.
Growth stocks are ideal for you as an investor who is looking for long term investment within a company that is seeking great growth over years. But, with that having been said like with anything in life the bigger the organisation the greater possibilities of risks that it will take along with it, which is why investing in growth stocks is more risky and volatile compared to value stocks.
When it comes to investing in growth stocks just because they are aimed in the name of growing and becoming bigger, does not necessarily mean you have to invest with great cash amounts. As previously stated the risks and the volatility within growth stocks could potentially see you losing your investment regardless as to what your investment amount is, it can all be lost quickly.
However, having said that if you invest wisely and with the thrill and adrenaline of being a part of such investing is what drives you, then growth stocks are for you!
The Top 7 Growth Stocks To Buy In 2023
- C3.ai Inc (AI)
- PayPal (PYPL)
- Autodesk (ADSK)
- Amazon (AMZN)
- Pinterest (PINS)
- Tesla (TSLA)
- Microsoft (MSFT)
For those looking to diversify your portfolio in 2023, here are the best 7 leading growth stocks to keep an eye on:
1. C3.ai Inc (AI)
Artificial Intelligence has been termed a general-purpose technology that could transform the world as electricity did in the 20th century or the steam engine in the 19th century. In essence, betting on an artificial intelligence stock for growth is a practical choice to make and the reason why C3 makes it to the top growth stocks to invest in 2023.
While C3's stock has been quite volatile since 2020, its core metrics point to potential long-term growth. For instance, C3 has net cash reserves of $1 billion, with a market capitalization of just a little over $2 billion. This means anyone getting in now has a margin of safety on this stock. A margin of safety is essential, especially now that the stock markets are being hit by all kinds of external factors ranging from inflation, rising interest rates, and geopolitical risks.
It is also noteworthy that C3 has high-value clients that guarantee stable long-term revenues. For instance, C3 recently landed a U.S Department of Defense contract worth $500 million. This alone makes C3 a pretty solid growth stock to invest in for 2023.
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2. PayPal (PYPL)
PayPal is one of the world's most popular ways to send and receive money. With more than 375 million users in over 200 countries, it has grown exponentially since its founding in 1998.
One thing that makes PayPal particularly interesting as a growth stock is its ability to adapt to the changing environment. PayPal recently announced that it was in the process of launching a stable coin. This is a big deal as it would give PayPal an edge in the first growing cryptocurrency market, which was worth $3 trillion until the recent correction. With the decentralization of finance becoming the most potential direction the finance industry could take in the future, PayPal could see its value grow exponentially.
PayPal earnings also paint a picture of a company that is on solid ground and getting better. Per its Q4 2021 results that were announced in February 2023, PayPal revenues grew by 18% to hit $25.4 billion. For the first time since it was created, PayPal also announced that yearly TPV pushed through the $1 trillion mark, indicating that PayPal's adoption in the global payments market was on a healthy growth trajectory.
As the evolution of the digital world continues, buying PayPal stock in 2023 makes a lot of sense for an investor chasing growth.
Don't Miss: PayPal (PYPL) Stock Price Predictions
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3. Autodesk (ADSK)
Autodesk is an engineering services company whose services include AutoCAD, Survey and Design Analysis software, and documentation solutions.
One thing that makes Autodesk stand out as a growth stock to buy in 2023 is its fast-expanding assortment of products. Aside from its core engineering software, Autodesk is also getting into other high-growth areas, key among them being 3D printing. This only means one thing, revenue growth and, by extension, potential stock price appreciation in 2023 and beyond.
It is also noteworthy that Autodesk's core services are pretty much diversified, and revenues are unlikely to be affected by a slowdown in just one core market. At its core, Autodesk is a software company with competitive software products targeting multiple industries that range from media, manufacturing, engineering to architecture.
Revenues are also growing pretty well in all its core markets. For instance, in Q4 of 2023, Autodesk announced that its revenues rose by 17% compared to a similar quarter in the 2021 financial year to hit $899 million.
A combination of a strong and growing product range and growing revenues make Autodesk a top growth stock to invest in 2023.
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4. Amazon (AMZN)
Amazon has become one of the most successful companies in recent times and is attracting investors from worldwide. Amazon's growing attractiveness to investors is not without basis.
For a start, Amazon now dominates the online shopping market, and as of 2021, its share of the U.S e-commerce market stood at over 40%, way ahead of Walmart and many other top competitors such as eBay. This is a big deal considering that more people are now shopping online, which means Amazon will keep generating billions of dollars off eCommerce for years to come.
This is most evident in Amazon's most recent quarterly results. In Q4 of 2021, Amazon announced that revenues from online retail had dropped by 1%. Interestingly, they still came in at a staggering $66.08 billion compared to $66.45 in a similar quarter in 2020. When you factor in the fact that 2020 was an anomaly characterized by lockdown shopping, it is not hard to see that Amazon has a strong grip on online retail, and can only grow, not just in 2023, but for years to come.
Besides online shopping, Amazon is pretty diversified and has a healthy lead in many high-growth industries. One of the key growth markets where Amazon has a strong foothold is in the cloud services market, through Amazon Web Services.
The cloud services market has a Compound Annual Growth Rate of 16.3%, and is expected to be worth $947.3 billion by 2026. Through the Amazon Web Services, Amazon holds 33% of this market and continues to grow the revenues that it generates off cloud services, as evident in its revenues in Q4 of 2021.
In Q4 of 2021, Amazon's revenues from the cloud business pushed through the $50 billion mark, putting the company's total cloud business revenues for the year at $178 billion. As demand for cloud-based services grows, Amazon's revenues from cloud services will also grow and help drive AMZN value growth in 2023 and beyond.
Amazon's growth has been impressive for an e-commerce company that first started its journey as an online bookseller in 1994. The future looks even brighter as it continues to get into new lucrative markets such as video streaming.
Without a doubt, Amazon is a big potential growth stock to invest in 2023.
Read Also: Amazon Stock Price Predictions
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5. Pinterest (PINS)
Pinterest is a social media site that is changing the game of online social interactions. You can create your visual mood boards to help inspire you with all sorts of ideas and creative projects.
Pinterest also just got a lot more potent with the ability to buy products through its media site and new features that let you shop directly from any pin. You can also get advice on when an item will be in stock and browse for different retailers if desired.
The uniqueness of Pinterest makes it worth an investment to buy and hold. Unlike other social media platforms, which start with creative intentions but can lead elsewhere (i e interactive), this one was explicitly designed for creativity.
With some of the bigger social media platforms hitting a plateau in user numbers growth and engagement, Pinterest could see an upsurge in ad spending, a fact that could drive its stock price both in the short term and in the long run. This is already reflected in its revenues.
Per Pinterest's Q4 2021 results announced in January, revenues rose 20% to hit a high of $847 million. Pinterest also reported that in 2021, it successfully created the baseline tech needed for it to start offering content in video format. This is a big deal because video is one of the ways that people engage more with social media platforms today. Pinterest also noted that it was looking to work with content creators more closely in 2023 to scale Idea Pins.
This commitment to growth and a unique approach to social media means that investors can expect the Pinterest stock to deliver growth in 2023 and beyond. It's a growth stock you can count on not just this year but for many years to come.
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6. Tesla (TSLA)
In 2023, the automotive industry continues its march toward innovation with Tesla at its forefront. Tesla has been able to generate profits despite lower sales numbers than other auto companies, all thanks to the aggressive and visionary nature of Elon Musk.
However, it is not just Elon Musk's vision that makes Tesla a solid growth stock to invest in 2023. With more awareness about climate change, government policies are changing in favour of electric cars, too. By 2040, most countries in the developed world will have eliminated the internal combustion engine. The increased adoption of electric cars has seen Tesla rally in price over the last couple of years and made its founder, Elon Musk, the richest person globally, and by a wide margin.
While the legacy auto industry is hard at work trying to catch up, Tesla has an edge in key critical areas for success in the electric car market. These include autonomous driving technology, charging infrastructure, and producing batteries at scale. Tesla already has Gigafactories in the U.S and China, two of the biggest markets for EV cars globally.
However, the biggest news that makes Tesla a top growth stock to buy is its German Gigafactory. After lots of regulatory hurdles, Tesla has now received the regulatory nod to work on its $5 billion Gigafactory in Berlin and could start producing cars soon. This is a big deal as it will give Tesla a solid footing in the EU market, one of the most important markets for any industry.
Tesla's growing importance in the auto industry is evident in its Q4 results announced in early January 2023. Tesla reported that in Q4, it produced 305k vehicles and managed to deliver over 308k vehicles. In total, Tesla was able to deliver 936k cars in 2021. This points to both growing demand and improving efficiency within the company itself. This could help drive the revenues and the stock price in 2023 and beyond.
Tesla also has a wild card in Bitcoin, which could help push up the stock price in 2023. While Bitcoin is volatile, it is known to rally by hundreds of percentages in a short time, a factor that could play well into Tesla's value if a pump happens in 2023.
There is no wonder investors are shining on Tesla as it is considered a top growth stock to keep an eye on as we look to the future.
Check Out: Tesla Stock Price Predictions
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7. Microsoft (MSFT)
The giant software company, Microsoft, founded by Bill Gates and Paul Allen, is an excellent growth stock. It has been one of the most consistent tech companies to deliver high returns over time, with its solid principles in place for decades now.
Microsoft is the ultimate innovator, always looking for ways to improve and expand its product line. They took us from basic computers with windows in 1975 all of the way up until now, where they are leaders within video games, internet services, etc.
Since 2021, Microsoft has been quite aggressive in getting into the Metaverse, a technology development poised to reshape the internet as we know it. Some analysts believe that the Metaverse could hit $8 trillion by 2030, a factor that could see companies that jump in early grow in value not just in 2023 but for years to come.
Microsoft has made major inroads into the Metaverse through Microsoft Mesh. This is a platform through which users can use avatars to create an online persona and interact with others. Microsoft also recently announced that it had purchased Activision and will entrench itself in the virtual gaming space through it.
Microsoft has also seen its share of the cloud computing market grow over the last couple of years. In 2019 Microsoft beat Amazon to win a major U.S cloud-computing contract, Joint Enterprise Defense Infrastructure (JEDI), worth $10 billion over ten years.
Microsoft's main competitor Apple is following behind, but between the two giants, Microsoft holds the most power and is the leader within the software industry.
With the acquisition of Nuance in 2021, Microsoft has also gained a foothold in the highly resilient healthcare market while also creating more growth opportunities for its cloud business.
All the moves that Microsoft has made have reflected pretty well on its revenues so far. For instance, per Microsoft's Q2 2021 results that were released on January 25, 2023, revenues shot up by 20% to hit $51.7 billion. Net income also rose by 21% to $18.8 billion. All these are hallmarks of a growth stock, one that you can count on to grow your wealth.
With Microsoft continually innovating and making strategic acquisitions, MSFT is one clear growth stock to buy in 2023.
Don't Miss: Microsoft (MSFT) Stock Price Predictions
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How To Invest In The Best Growth Stocks?
Now we have covered seven of the best growth stocks to invest in for 2023, it's wise to bear in mind that there are also plenty more growth stocks to indulge in.
For a list of further stocks that are set to take 2023 by storm read 15 Stocks To Explode In 2023.
If you feel confident that you are ready to start investing in the top growth stocks and you are now searching for the ideal broker, check out eToro.
eToro is a trusted multi-platform that has become incredibly popular with investors around the globe and even seeing the rise in U.S investors coming on board. eToro has the top and best growth stocks ready at your leisure to start your journey into stock investing, along with much more on hand for you.
If you are a beginner just starting out in stocks or if you are an experienced investor, you can use this user-friendly platform to learn, compare trading prices and start trading in which avenue you wish.
A gentle reminder to always remember is that growth stock prices can change within no time at all. If a company's supply and demand is high the share price will change just as rapidly.
And the last word of advice is to remember that nothing is guaranteed with investing in stocks know matter if it's growth or value stocks you are investing in.
No matter your chosen route, it is always worth diving into plenty of research and looking at creating a risk management strategy so you are always planning ahead for plan B.
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Disclaimer: Stocks are highly volatile. Your capital is at risk. You should carefully consider your investment objectives and risk appetite before making a decision to buy stocks. Most importantly, do not invest money you cannot afford to lose.