Finally, industrial software company PTC (PTC 1.10%) is a play on digitization in manufacturing. I think those things are all sort of going to continue to be necessary,” argues Schoenstein. Rising interest rates make it more expensive for growth stocks to borrow money to fund their rapid sales and earnings expansion. Value stocks are considered to be undervalued at current market prices.
- Growth stocks refer to shares of companies that are expected to grow at rates significantly above the average for the stock market as a whole.
- Meanwhile, Bank of America called financials a “rare example of inexpensive high quality” in its 2023 outlook note.
- Despite turbulence elsewhere in the travel industry, Delta Air Lines (DAL) is on a smooth course, with the seatbelt sign switched off for investors, according to analysts at Morgan Stanley, where Delta is a top pick.
- Analysts expect the company to post a whopping 56% earnings per share growth in the next fiscal year ending June 2023, and the stock trades at a reasonable 17 times next 12 months earnings with a 2.7% dividend yield.
Here are the 6 stock market sectors that Wall Street’s top firms are most bullish about in 2023
The company is coming up on three years of sales and earnings data, both of which have grown each year since the company had its IPO in 2021. Analysts largely expect Lilly’s momentum to continue, thanks to a strong product pipeline. Before the end of 2023, Lilly should launch four more products plus another major indication for Mounjaro. One product to watch is Donanemab, a treatment for early-stage Alzheimer’s patients.
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Having posted several years of modest earnings per share, PODD’s high P/E of 116 shows investors’ bullish sentiment. The company will need high earnings growth to justify its current valuation. The stock is trading significantly below its 52-week high after declining through much of 2023.
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Quarterly earnings per share have been erratic, moving between positive and negative since the second quarter of 2021. Lilly EVP and CEO Anat Ashkenazi says the product portfolio can support “top-tier, volume-driven revenue growth” through 2030. In 2023, the company expects $30.3 to $30.8 billion in revenue and non-GAAP earnings per share of $8.10 to $8.30.
The Vita Coco Company, Inc. (COCO)
The dividend yields about 0.9%, which isn’t world-beating, but Dollar General’s annualized three-year dividend growth rate is more than 13%. Continued inflation in 2023 could prove challenging for Chipotle. But the chain has demonstrated its pricing power and has a long runway for geographic expansion. Management expects to open 255 to 285 new restaurants next year. Chipotle stock trades below $1,500 currently and the average consensus price target is about $1,775. As for the potential buyout by Capital One, Miller is neutral on the deal.
The surging cost of auto insurance has pushed more policyholders to shop around for better rates, a phenomenon Shanker says is good news for Progressive. “The combination of highly visible revenue and moderating expense growth should enable the company to meet or exceed intermediate term (2-3 years) gross margin targets i.e. 30%+, with a longer term goal of 35%,” Ehrlich says. It’s still too early to tell how the year will go, but even if a bull market returns, investors should stick with some of the lessons learned in 2022. One of those is finding great stocks and holding for the long term instead of panic selling.
Heading into 2023, there is more uncertainty than usual about what will happen next. The Fed may continue to push interest rates higher and the U.S. economy may slip deep into recession. A recent Morgan Stanley report predicts inflation will dip down to 2.4% by the end of 2023, the rate hikes will end and the economy will flatline but not shrink. Goldman Sachs is one of several firms that believes limited oil supply will keep prices elevated. Most Wall Street strategists are keeping their expectations for the stock market’s performance next year in check, though even the biggest bears believe that some parts of the market look attractive. IoT and AR are high-growth markets but still represent relatively small markets for PTC.
Between rentals in exclusive places that large hotels can’t offer and the ability to offer affordable long-term accommodations, Airbnb has been able to shift to meet demand. The best case for its future growth is the ability to do that again and change according to trends. Earnings per share have climbed in the past five years and are forecast to increase at nearly double that pace in the next five years. YELP needs to make good on that outlook to justify its P/E ratio value and to regain its lofty share price high from a decade ago.
In the coming quarters, expect Disney to continue growing its streaming revenue, but with a greater focus on profitability. Chapek, in his last earnings release, predicted Disney+ would be profitable in fiscal year 2024. Iger oversaw the launch of Disney+ in 2019 and likely doesn’t want to miss Chapek’s prediction. Theme park revenues are picking up after the Covid-19 shutdown, which helps the bottom line. In fiscal year 2022, the theme park business generated less revenue but higher operating income than the media business.
Chipotle also continues to open new locations, many with the chain’s drive-through format, Chipotlane. These expansion efforts along with price increases contributed to third quarter revenue growth of 13.7% over the prior year. The third quarter adjusted diluted earnings per share of $9.51 beat analysts’ estimates by $0.40.
Shoppers can’t get enough of Lululemon’s premium athleisure wear. The company’s special formula combines patented fabrics, classic styles, a commitment to the active lifestyle, and premium branding. Sales typically grow double digits each quarter, and Lululemon’s ability to charge high prices keeps it comfortably profitable.
UPS’s focus on the small and medium-sized business, healthcare, high-growth international, and business-to-business e-commerce markets is improving the quality of its revenue. Allied with a renewed focus on sweating its existing assets and a willingness to eschew less profitable deliveries rather than chasing volume, UPS is improving its profit margin. If a recession is in the cards for 2023, money managers believe businesses with steady revenue streams that provide crucial or sticky services should perform well for investors.
It’s still demonstrating high double-digit sales growth after triple-digit growth through several consecutive quarters at the beginning of the pandemic, and it has returned to hearty profitability. Inflation proved a bit of a challenge last year, but management is addressing lower same-store sales through raised prices. Sales overall have been very strong, increasing 53% year over year in the 2022 third quarter.
Analysts expect earnings growth to persist for the next several years. Analysts project 28.6% EPS growth next fiscal year, which is below the five-year average yearly growth estimate. The stock is trading below its 52-week high and its all-time 2022 high. LYV’s share price gain has outpaced the S&P 500 over the past decade, averaging 15.9% per year versus 12% per year for the S&P 500. Notably, the Federal Reserve imposed an asset cap of $1.95 trillion, which remains in place today.
Growth stocks may be overvalued based on current market prices but are expected to grow and exceed their current valuation. Value stocks are typically considered low-risk, low-volatility investments, whereas growth stocks are higher-risk stocks with the potential for much larger upside over time. Generally, growth stocks are smaller, newer companies disrupting their industry. They tend to offer unique services and products, and frequently develop novel technologies or intellectual property that put them ahead of their competitors.