The Nasdaq (^IXIC -2.05%) got off to a hot start in 2023.
After the tech-centric index fell 33% in 2022, investors seem to be eyeing bargains on the index and are hopeful that cooling inflation and slowing interest rate hikes from the Federal Reserve will encourage a recovery this year.
With the Nasdaq jumping nearly 11% in January, the index seems to be well on its way to a new bull market. Let's take a look at the three top-performing Nasdaq stocks (with a market cap of at least $2 billion) last month to see whether any of them are still worth buying.
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1. Sotera Health (up 107%)
Sotera Health (SHC 0.46%), which specializes in sterilizing healthcare equipment, jumped in January, primarily for one reason.
The stock doubled on Jan. 10 after it settled an outstanding lawsuit, saying its subsidiaries agreed to settle more than 870 ethylene oxide cases against Sterigenics. As part of the agreement, which is not considered an admission of any liability for emissions from the Willowbrook facility that could have posed a health hazard to surrounding communities, the company will pay $408 million.
Wall Street analysts cheered the announcement, saying the agreement was much better than feared, and several analysts upgraded the stock on the news.
The company has been dogged by lawsuits after safety concerns in the past, but it seems like the worst fears are over, and the stock returned to levels it traded at last September before other lawsuits emerged.
The settlement is a one-off event, so investors shouldn't expect more blowout gains over the rest of the year. However, the company's leading position in sterilization services gives it high margins and should help drive the stock's performance over the long term.
2. Dada Nexus (up 87%)
Dada Nexus (DADA 1.09%) is a local, on-demand retail and delivery platform. It does business through the retail platform JD-Daojia and the delivery platform Dada Now. The company works closely with JD.com, China's largest direct online retailer.
There was little company-specific news out on Dada Nexus last month. However, the stock flew higher early in the month on signs of China reopening as government officials dropped strict COVID-related restrictions. That shift favors the company's retail and delivery platforms as its business is closely connected to JD.com and general retail demand.
There were also signs Dada performed well during the Chinese New Year celebration, as management said JD Shop Now sales soared 90% during the Chinese New Year festival.
Chinese stocks had a strong January across the board. If the Chinese economy continues to reopen and the U.S. stock market keeps its positive momentum, Dada Nexus could have a lot of room to run in 2023.
3. Peloton Interactive (up 63%)
Peloton Interactive (PTON -0.98%) rallied through much of January. The stock has more than doubled year to date after jumping another 27% on Feb. 1 following the release of its latest earnings report. In a letter to shareholders, CEO Barry McCarthy said the company is poised for an "epic comeback."
There wasn't any major news out on Peloton in January specifically, but the stock had fallen so sharply in the preceding two years that some investors likely saw an opportunity for a successful turnaround, especially with the new year's bullish sentiment.
Those instincts proved right after Peloton reported its fiscal 2023 second-quarter earnings with overall revenue down sharply but subscription revenue up 22% year over year, showing the company is growing its highest-margin business.
Because of the shift away from equipment sales, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss narrowed from $266.5 million in the prior-year period to $122.4 million. Revenue of $792.7 million was down 30% year over year but still easily beat analysts' estimates, showing how low expectations have become for Peloton.
The company still faces an uphill battle to get back to profitability and full health, which will be difficult as subscriber growth has slowed. But the stock price has fallen so far there's a lot of upside potential if it can move toward stabilizing the business and future profitability.
