The start of a new year is an excellent time to add to your portfolio, with plenty of opportunities for growth ahead. A sell-off in 2022 has put numerous stocks on sale this January, including growth stocks that will likely provide significant gains over the long term.
For example, Microsoft (MSFT +3.54%) and Alphabet (GOOG 1.20%) (GOOGL 1.27%) have watched their stocks tumble over the last year. However, these companies have continued to report revenue growth despite a poor economic climate.
As investing star Warren Buffett has said, "If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes." Holding strong growth stocks for the long term can safeguard your portfolio from macroeconomic declines, as has been the case in the last year. Microsoft has retained 151% growth in its shares since 2018, while Alphabet has grown 57% in the same period, even with a recent sell-off.
Here are two growth stocks to buy hand over fist in 2023.
1. Microsoft
Microsoft's stock is easy to recommend with its triple-digit stock growth in the last five years and its strong position in multiple lucrative industries. The company's home-grown brands, such as Windows, Office, Xbox, and Azure, have become powerful forces within their respective industries and provide a promising future for the tech titan. In fact, its average 12-month price target is 33% higher than its Jan. 5 price of $222.31, with analysts expecting it to hit $295.17.
From 2015 to 2022, Microsoft's revenue increased by 112% from $93.58 billion to $198.27 billion, while operating income more than quadrupled from $17.98 billion to $83.28 billion. In 2022, the company's earnings remained on an upward trajectory despite coming off a challenging year.
NASDAQ: MSFT
Key Data Points
Moreover, one of the most attractive aspects of Microsoft's stock is its considerable market share in several swiftly growing industries. For instance, the cloud computing market was worth $368.97 billion in 2021 and is expected to grow at a compound annual growth rate (CAGR) of 15.7% until 2030 (per Grand View Research), making Azure's 21% market share in the industry encouraging.
Along with leading positions in operating systems, productivity software, and gaming, Microsoft is a no-brainer investment in 2023. The company's stock is one you can buy now and sit back as it passively makes money indefinitely.
2. Alphabet
Investors have dragged down Alphabet shares 37% over the last year as Wall Street has grown uneasy over its advertising-dependent business. In August, Insider Intelligence reported ad spending had fallen 3.3% since the year before, decreasing for the third month in a row. However, the decline improved over July, when spending fell 12.7%. Rises in inflation and interest rates throughout last year led businesses to slash budgets, including advertising expenditures.
As nearly 80% of Alphabet's revenue is earned through ads on services such as Google, YouTube, and Android, investors justifiably grew concerned in 2022. However, economic headwinds are temporary, and the digital advertising market still has plenty of room for growth. According to research from Omdia, the digital advertising market was worth $190 billion in 2022 and will almost double to $362 billion by 2027.
NASDAQ: GOOG
Key Data Points
Additionally, more online industries are turning to digital ads to boost revenue and reduce service fees for consumers as the cost of living rises. In 2022, demand for ad-supported options in the streaming industry skyrocketed, prompting entertainment giants Netflix and Disney to fully embrace the trend. The potential for other online businesses to do the same is endless, with Alphabet well positioned to reap the rewards.
In the third quarter of 2022, Alphabet's revenue increased 6% year over year to $69.1 billion, with operating income hitting $17.1 billion. As expected, revenue from YouTube ads and Google Network declined slightly. However, its Google Cloud segment increased by 37.6% to $6.8 billion, growing more than any other cloud computing service in the quarter.
Despite investor concern for Alphabet's business in 2022, the growth stock remains a compelling buy. The company's core business has plenty of room for growth in the coming years, with its quickly expanding position in cloud computing making it an excellent investment in 2023.
