While many tech stocks have enjoyed great performances to start 2023, a few haven't. But it's not like these companies are trending in the wrong direction. These stocks legitimately have cases for strong bull runs in the future.
Read on to find out which stocks I think have opportunities to rise throughout 2023 and beyond.
NASDAQ: AMZN
Key Data Points
Amazon
Amazon (AMZN +1.07%) has been silently improving its business since it laid off employees and reduced some of its warehouse space in mid-2022. In Q4 it posted a 9% sales increase across the board, but its two key segments continued to deliver above-average growth.
| Segment | YOY Growth |
|---|---|
| North America Sales | 13% |
| International Sales | (8%) |
| Amazon Web Services (AWS) | 20% |
Data source: Amazon. YOY = Year over Year.
Without its international segment, Amazon would be doing quite well. However, it's still scaling that business up and figuring things out. Still, over the long term, this wing should provide a helpful revenue boost to Amazon -- and with its other segments growing briskly, the company should continue to deliver rapid revenue growth.
However, the market isn't valuing the stock like this is possible.
AMZN PS Ratio data by YCharts
Amazon is trading well below its two-decade price-to-sales valuation average, despite high-margin segments (like AWS and advertising services) becoming a more significant part of its business. As Amazon works toward returning to free cash flow generation, don't be surprised to see this stock move higher; it is only up about 11.6% this year.
Autodesk
Few software companies have a tighter hold on their customer bases than Autodesk (ADSK +0.33%). Autodesk provides architects and engineers with the CAD (computer-aided design) software needed to do their daily jobs. Without it, this occupation would have to revert to paper and pencil drawings, something no one would want to do.
NASDAQ: ADSK
Key Data Points
As a result, the business has extreme pricing power and can generate a steady income stream with its subscription business model in good and bad economic times. In Q4 of FY 2023 (ending January 31, 2023), revenue rose 9% to $1.32 billion. FY 2024 will likely bring about the same levels of growth, with revenue expected to rise 8% at the midpoint.
While many software companies are guiding for a rocky 2023, Autodesk is in a different class. The stock also trades for a reasonable 21 times free cash flow. Autodesk won't set the world on fire with growth, but its steady performance brings stability to a portfolio. With the stock still down more than 40% from its high and only up 5% this year, it's a strong candidate for a stock that could have a great run.
Twilio
Few stocks saw their prices fall from grace throughout 2021 and 2022 more than Twilio (TWLO +2.02%), as its stock is more than 85% below its all-time high. However, Twilio has a strong business that is rapidly moving toward profitability.
Twilio is all about customer communication. Whether it's receiving a text message from a business about an appointment, reducing customer acquisition costs, or creating personalized marketing emails, Twilio is your go-to company.
NYSE: TWLO
Key Data Points
In Q4, Twilio delivered 21% organic revenue growth, surpassing $1 billion in quarterly revenue for the first time. However, this growth is expected to slow in Q1 to between 13% and 14% as Twilio's clients aim to reduce marketing and customer acquisition costs in a challenging economic environment.
It also issued guidance for $300 million in non-GAAP operating profit for 2023, which is big news for investors. To get there, Twilio has gone through two rounds of layoffs, laying off 11% of its workforce in September 2022 and another 17% in February. Any profits would mark the first time investors have seen any profits (GAAP or non-GAAP) in Twilio's history, marking a huge milestone for the company.
This pivot from growth at all costs to profitability shows management's willingness to shift tactics, but the stock hasn't been rewarded. Twilio's stock remains at its valuation lows, and well below its average.
TWLO PS Ratio data by YCharts
Twilio's stock is already up 30% this year, but with how low the stock is valued, I wouldn't be surprised to see that trend continue throughout 2023, especially if it delivers on its profitability promise.
