Last year, investors were taken for quite the ride. The broad-based S&P 500 delivered its worst first-half performance since 1970, and its 19% decline at the end of the year equated to its worst return since 2008.
But this pales in comparison to what growth stock-dependent indexes went through. The Nasdaq Composite and Nasdaq 100 -- an index comprised of the 100 largest nonfinancial stocks listed on the Nasdaq exchange -- shed 33% of their respective values in 2022.
On the bright side, pain on Wall Street always means opportunity abounds for long-term investors. No matter how long or steep a bear market decline is for the major indexes, these drops are always eventually placed in the rearview mirror by a bull market. The same will hold true for the drubbing the growth-driven Nasdaq 100 has taken over the past year.
Image source: Getty Images.
At the moment, two game-changing Nasdaq 100 stocks stand out as phenomenal values that can be bought hand over fist in 2023. Meanwhile, another downtrodden Nasdaq 100 stock is still best avoided by investors in the new year.
Nasdaq 100 stock No. 1 to buy hand over fist in 2023: CrowdStrike Holdings
The first Nasdaq 100 stock that's been beaten down and now represents an amazing deal is cybersecurity company CrowdStrike Holdings (CRWD 3.86%).
The biggest knock against CrowdStrike has been its valuation. During a bear market, investors are less willing to pay a premium (i.e., a triple-digit price-to-earnings ratio) to own growth stocks. But following a 66% decline from its all-time high set during the fourth quarter of 2021, CrowdStrike's valuation is no longer an issue.
NASDAQ: CRWD
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One reason CrowdStrike should begin to find support for its struggling stock in 2023 is the defensive nature of the cybersecurity industry. Since the COVID-19 pandemic began, businesses of all sizes have accelerated their shift of data online and into the cloud. Hackers and robots looking to steal this sensitive data don't take time off just because Wall Street had a bad day or U.S. economic growth slowed a bit. Cybersecurity solutions have effectively become a basic necessity.
But it's not just macro factors working in CrowdStrike's favor. The company's cloud-native Falcon security platform has proved superior to its competition in end-user protection. Being built in the cloud and relying on artificial intelligence (AI) and machine learning allow Falcon to become more effective at recognizing and responding to possible threats over time. Given that CrowdStrike's gross retention rate has improved from the 93 percentile in fiscal 2018 to more than 98% in fiscal 2022 suggests that its clients see value with Falcon.
What's more, CrowdStrike has had no issues growing both its subscriber base and add-on sales. With one quarter left to go in fiscal 2023, the company has 21,146 subscription customers. For context, it had 450 subscription customers at the end of fiscal 2017.
More importantly, the percentage of these subscribers that have purchased five or more cloud module subscriptions has jumped to 60% as of the end of October 2022. As existing clients have expanded their use of CrowdStrike solutions, the company has seen its adjusted subscription gross margin climb to almost 80%. With adjusted subscription margins this high, CrowdStrike's profit can grow just as quickly, if not faster, than its sales. This is what makes CrowdStrike a screaming buy at its reduced valuation.
NASDAQ: INTC
Key Data Points
Nasdaq 100 stock No. 2 to buy hand over fist in 2023: Intel
The second Nasdaq 100 stock that can confidently be bought hand over fist by patient investors is semiconductor stock Intel (INTC +1.07%).
For the past three years, Intel has contended with two headwinds. It's faced increased competition from core rival Advanced Micro Devices (AMD +3.50%) and dealt with persistent supply chain issues and order uncertainty tied to the COVID-19 pandemic. The result is a halving of Intel's stock since hitting its record high. Thankfully, it's led to an incredible opportunity for investors to pounce.
Although AMD has, indeed, chipped away at Intel's central processing unit (CPU) market share in personal computers (PCs), mobile, and data center servers, these losses remain negligible on a nominal basis. In fact, Intel managed to claw back CPU share in PCs from AMD during Q3 2022. Intel's CPU share in PCs, mobile, and data center servers is still astronomically high. There's plenty of cash flow being generated from Intel's core operations to invest in new chip designs and other high-growth ventures.
One of the more interesting strategic moves being made by Intel, beyond its core client-computing and data-center operating segments, is building out its foundry operations. Intel broke ground on two chip fabrication plants in Ohio last year, and is expected to be one of the top beneficiaries of the CHIPS and Science Act that was signed into law by President Joe Biden this past August. The CHIPS Act sets aside $52.7 billion for subsidies to aid in the manufacturing of domestic chip manufacturing facilities and to promote new chips designs.
Another key catalyst for Intel is autonomous vehicle company Mobileye Global. Although Mobileye went public a few months ago, Intel remains the majority shareholder. Mobileye has been Intel's fastest-growing operating segment, with year-over-year sales sustaining a roughly 40% growth rate in an exceptionally challenging economic environment.
With Intel closer to its book value than at any time over the past four decades, it stands out as a screaming buy in 2023.
Image source: Getty Images.
The Nasdaq 100 stock to avoid like the plague in 2023: Moderna
But not every Nasdaq 100 stock is necessarily going to be a winner. As we steam ahead into 2023, biotech stock Moderna (MRNA 0.53%) can be actively avoided.
Moderna's claim to fame occurred during the COVID-19 pandemic. It's one of a small handful of drug companies to have successfully developed a vaccine for COVID-19. Spikevax turned out to be one of only three COVID-19 vaccines to surpass a vaccine efficacy (VE) of 90% in clinical trials. Even though VE isn't everything when assessing a vaccine, it helped Moderna's Spikevax become one of the premier treatments during the pandemic.
Moderna also made waves last month when it announced that its investigational messenger-RNA cancer vaccine, in combination with Merck's blockbuster cancer immunotherapy Keytruda, met its primary endpoint as an adjuvant treatment for patients with advanced melanoma in a phase 2b trial. This study suggests that Moderna may be more than a one-focus wonder.
NASDAQ: MRNA
Key Data Points
However, Moderna is set to face headwinds this year that could weigh heavily on its share price.
For starters, COVID-19 vaccines have shifted from advanced purchase agreements (APAs) with the federal government in the U.S. to the private market. On one hand, this gives Moderna plenty of power to boost the price of Spikevax. Moderna CEO Stéphane Bancel is expected to set the price of the vaccine between $110 and $130. That's many multiples higher than the U.S. was paying with its APAs last year.
But this is a two-sided coin. A higher price will increase competition from other vaccine developers with equally impressive VEs. This includes Pfizer and BioNTech, which collaborated to develop Comirnaty, a messenger-RNA-based vaccine, as well as Novavax, whose protein-based vaccine offers an alternative to messenger-RNA vaccines yet still delivered a 90% VE in clinical trials. Without APAs in place, Moderna's COVID-19 sales could fall by well over 50% in 2023.
The other headwind is Moderna's valuation in a bear market. Despite its positive mid-stage cancer vaccine trial with Merck, other revenue channels are years away from becoming a reality. Moderna is a $74 billion company with effectively all of its revenue tied to one indication. Worse yet, it's not even guaranteed the company will be profitable this year. It's an incredibly risky investment that makes it a company easy to avoid in 2023.
