As we approach the end of 2023, amid a backdrop of persistent economic challenges and a burgeoning interest in artificial intelligence (AI), savvy investors are looking to rebalance and diversify their tech portfolios.
Great tech stocks to buy at this important crossroads include Google parent Alphabet (GOOG 9.96%) (GOOGL 10.22%), financial technology expert StoneCo (STNE 5.01%). They are innovative leaders in their chosen fields, supporting long-term shareholder value from distinctly different angles.
Investing in these companies today can provide both a hedge against the current economic instability and exposure to key areas of future tech growth.
Alphabet: Up 50% in 2023
Alphabet has woven a narrative of growth and resilience in 2023, telling a story for savvy investors to follow with an open wallet.
Despite an unexpected stock dip following its analyst-stumping third-quarter earnings report, the company's overall 50% ascent this year shines the spotlight on a tech titan unfazed by fleeting market sentiments. This company can take a beating without retreating, and so can its two classes of public stock.
At the heart of this resilient rise lies Alphabet's formidable advertising prowess. With ad sales constituting a significant portion of its revenue and the YouTube video platform's figures outperforming projections, Alphabet's grip on digital advertising is stronger than ever. Google search ad revenues rose 11% year over year and YouTube's ad sales increased by 12%. That's not too shabby given the stubborn downturn in the digital advertising market as a whole. These jumps, coupled with an operating margin boost from 25% to 28%, underscore Alphabet's ability to adapt and thrive even in a lower-growth environment.
While some may cast a wary eye on Google Cloud's modest growth, missing Wall Street's expectations by a narrow margin, it's essential to see this in light of Alphabet's broader strategic movements. The company isn't just playing the game; it's actively shaping the field, particularly in the realm of AI. Its substantial investment in the innovative Anthropic group and the development of its own generative AI system, Gemini, highlight Alphabet's commitment to staying at the forefront of technological innovation. That's especially crucial at the threshold of a game-changing generation shift, like the sea change you see around AI right now.
Given Alphabet's continued market dominance in search and its strategic forays into AI, the forward price-to-earnings ratio of 19.9 looks quite modest. For long-term investors, Alphabet's story in 2023 is not just about overcoming temporary setbacks but about seizing opportunities in a rapidly evolving tech landscape.
So I highly recommend grabbing a few shares of this relentless innovator at a really decent stock price. Then you can stick those stubs under your pillow and sleep soundly for many years, or even decades.
StoneCo: Up 14% in 2023
In the face of adversity, StoneCo has not just endured; it has evolved. The company's journey over the past couple of years is a compelling story of adaptation and strategic growth. The challenges of 2021, with a rapid rollout of products and macroeconomic headwinds, were significant, but they set the stage for a remarkable comeback.
The recent numbers speak volumes about the fintech veteran's rejuvenation. A 47% year-over-year surge in payment clients and an improved take rate highlight a growing, engaged customer base. StoneCo's third-quarter report further cements its upward trajectory, boasting a 302% increase in adjusted net earnings and a solid 25.2% rise in net revenue. These figures underscore the company's potential in the highly competitive financial services sector.
Despite Warren Buffett's Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) being an early investor in StoneCo, investor enthusiasm has been tempered recently because of struggling credit products and organizational changes. However, the focused restructuring aimed at more efficient pricing and product development. Along with scaling down a distressed loan portfolio, StoneCo appears positioned for sustainable growth at this point.
Looking ahead, StoneCo should deliver consistent growth and profitability in the coming years. With its management team now stabilized and a deliberate approach to expanding its financial services, the company is making all the right moves. At the same time, the Brazilian economy looks ready to run as soon as the country gets a grip on its own inflationary concerns. A healthy target market can do wonders for an innovator with ambitious growth ideas. StoneCo's cloud-based financial services with a focus on small business owners can really sing as the Brazilian economy gets back on its feet.
Though the company faces some headwinds today, it's still a promising growth stock with bargain-bin valuations of 10.4 times forward earnings and 11 times free cash flows. For investors seeking a stock with growth potential and a fresh round of positive transformation, StoneCo presents a promising opportunity.
