Despite the challenges presented by the current economic downturn, there are still plenty of reasons to be optimistic about the tech sector’s future. 2022 has been nothing less than a nightmare for investors in tech stocks. However, in all likelihood, the stock market conditions will improve substantially in the coming year, pointing to a strong upside for tech stocks. Therefore, it’s an ideal time for investors to look for the best tech stock picks for 2023.
However, it’s also important to avoid catching a falling knife. The current macroeconomic headwinds may impose pain in the short term, but they also present an opportunity for long-term investors to grab discounts. In most cases, companies print deep losses for a reason, but most tech stocks suffer from Wall Street’s overreaction. For long-term investors, these stocks offer a chance to gain exposure to some of the best tech businesses at an incredible discount. Having said that, here are seven top tech stock picks for 2023.
|IBM||International Business Machines||$149.16|
Arista (NYSE:ANET) is among the top cloud networking solutions providers benefiting from secular tailwinds in the cloud, data centers, and edge computing markets. The company has recently introduced numerous new, lucrative products, including its updated routing platform and encrypted data-transit offering. Moreover, its systems can handle multiple updates without any downtime. Additionally, it offers greater automation than its peers, giving it a major edge over its competition. Hence, its focus on innovation and superior customer service positions the company for continued success in the coming years.
Impressively the firm expects an average sales growth of 20% from 2020 to 2025, with 25% revenue growth expected next year. Moreover, it expects its gross margins to reach over 61% to 64% over the long term. The strength in its business is driven by its robust enterprise business and cloud customer demand, which should remain strong for the foreseeable future.
PayPal (NASDAQ:PYPL) is one of the largest and most influential fintech businesses globally. It boasts a remarkably consistent business that’s generated more than 18% average growth in the past five years. With the global fintech space forecasted to grow at a CAGR of 16.9% until 2028, I expect PYPL stock to remain a no-brainer investment.
Its solid execution has resulted in another stellar quarter for the firm. Transactions per active account during the third quarter soared over a record 13%. Its management is executing belt-tightening measures that have the firm on track to save $900 million annually. Moreover, it bought back a tremendous 10 million shares, returning $939 million to its shareholders this year. Despite its stellar performance, its stock is down over 50% for the year, which makes it a highly attractive bet at current prices.
Taiwan Semiconductor (TSM)
It doesn’t take a rocket scientist to understand why big-money investors are wagering on shares of Taiwan Semiconductor (NYSE:TSM). As a leading semiconductor foundry, TSM has been at the forefront of the technology for years, giving it tremendous wiggle room to command higher prices. TSM’s market dominance also allows them to reinvest more into its business, perpetuating its competitive advantage.
Due to the unfavorable semiconductor cycle, TSM stock has taken a major hammering at the stock market. However, the excess demand for its products has effectively insulted it from the crisis. This is evidenced by its robust sales growth this year, which is more than 20% higher than its historical 5-year average. Together, these factors make TSM an attractive investment for the long haul.
JD.com (NASDAQ:JD) is a Chinese eCommerce specialist with superior fundamentals. It has posted double-digit growth margins in revenues and earnings. Recent results have been lackluster due to the issues with the broader economy and the Asian nation’s reopening troubles. Despite the unconducive conditions, the business has been resilient, beating earnings estimates over the past several quarters.
With conditions set to improve substantially with the Chinese economy next year, analysts estimate a snapback in results. Analysts, on average, expect its sales to climb to $168.7 billion in 2023, up substantially from $145.4 billion this year. This represents over 15% growth from the prior-year period. Its stock price is down substantially this year, and based on its robust growth prospects is still a reasonably valued stock. Hence, it’s a great long-term investment that is in position for a strong comeback in the upcoming quarters.
Imax (NYSE:IMAX) is a cinema technology company providing an immersive big-screen experience with custom audio. It is a clear market leader in upmarket cinema technology and has a global reach across 75 countries. Its business has taken a hammering particularly hard by the coronavirus pandemic. Previously, it was a profitable business with a clear upward trajectory. However, recent results have shown that it has turned a corner post-pandemic.
Audiences are returning in droves to cinemas, and Amazon’s recent plans to spend $1 billion annually on theatrical movie release points to a hefty upside ahead. Though streaming content is on the rise, Amazon’s recent move suggests that there is still a sizeable growth runway for the sector. Therefore, Imax looks poised for continued success in the years ahead.
International Business Machines (IBM)
International Business Machines (NYSE:IBM) is widely known as one of the largest information technology companies in the world. The company has a long history dating back to the early days of computing and has been a major player in the industry ever since. In recent years, IBM has been expanding its reach into more profitable markets, including cloud computing and artificial intelligence. Its acquisition of Red Hat, a leading open-source software provider, was a major step forward in developing its expertise in emerging technologies.
Its positive results, of late, have been driven by growth in its software and consulting revenues that contributed to roughly 70% of its annual sales in the third quarter. The hybrid cloud business alone could grow by 18.4% from 2021 to 2030. As we advance, the firm is set to benefit from the growing digitization of enterprises and should capitalize on the rising demand for AI and hybrid cloud solutions.
Baidu (NASDAQ:BIDU), also known as China’s Google, is one of the most underappreciated businesses in the tech space. With over a billion internet users in China, Baidu holds over an 80% market share in the Chinese search market and an even more dominant share in the mobile segment. Not only is Baidu a leading search engine provider, but it also has the fourth largest cloud business in China, with around 9-10% market share. Also, the internet giant has secured permits to provide driverless service in Beijing, positioning it as a first-mover in the massive untapped driverless AI sector.
Given the company’s dominant market position in China’s search market and diversified business portfolio, Baidu presents significant growth prospects and profitability potential. Though it operates in a challenging economic environment, Baidu’s long-term bull case remains firmly intact. Its stock remains undervalued, providing investors with an attractive entry point.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.