3 stocks you’ll regret not buying before a rally in 2023

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The stock market can play tricks on you. You feel invincible in a bull market, but in a bear market you feel like you will never make money again. It’s been a long fall for many growth stocks in 2022, but hold your head up high. Historically, Wall Street has always rallied, and there’s no reason it should be any different.

The market will likely rebound at some point, so now is a great time to start thinking about your best investment ideas for 2023. Shopify (NYSE: SHOP), Working day (NASDAQ: WDAY)and Sea Limited (NYSE: SE) were losers in 2022, but here’s why they could be big winners in 2023 and beyond.

Stock up on this e-commerce stock

will heal (Shopify): Most long-term Shopify investors probably want to forget about 2022. This time last year, it flirted with all-time highs. However, the bear market hit this single record hard. Since hitting its all-time high, Shopify has lost nearly 80% of its value.

True, the stock price had probably exceeded its rate of growth. Additionally, e-commerce growth has slowed as consumers emerge from lockdowns, making its price unsustainable. However, the case of Shopify stock may have improved during this period from a competitive point of view. It has built an ecosystem to meet the direct needs (and many indirect needs) of e-commerce businesses.

Shopify Plus, its software package designed to appeal to large, high-growth businesses, continues to gain traction. During the third quarter 2022 earnings call, Shopify President Harley Finkelstein revealed that Plus claimed 35% of all professional point-of-sale sales in the third quarter, compared to 14% in the year-ago quarter. former.

Additionally, the Shopify Fulfillment Network (SFN) makes order fulfillment and returns easier for customers. With Shopify’s purchase of Deliverr, it can now serve as a one-stop-shop for all logistics needs. The fact that Amazon is its only competitor in this area will help Shopify stand out from its software-oriented peers.

Still, Shopify has returned to losses as the cost of building the distribution network weighs on the bottom line. Additionally, while third quarter revenue of $1.4 billion was up 22%, this was lower than the three-year compound annual growth rate for revenue of 52%.

Still, for the remainder of 2022, the company expected slower operating expense growth and a higher percentage of merchant solutions revenue. Merchant solutions, the segment that includes SFN and other business management services, accounted for 72% of the company’s revenue in the third quarter. Shopify’s revenue also grew 26% year-over-year, beating the overall average.

Additionally, its shares are selling for just 9 times sales, a massive reduction from the 45 P/S ratio it achieved a year ago. With the company positioned for further growth, Shopify stock is expected to rally in 2023.

Shares of this workforce management company could rebound in 2023

Jake Lerch (workday): If you think 2023 can be a rebound year for the stock market (and I do), it’s worth thinking about: Which stocks would benefit the most? For me, Working day is a name that jumps off the page.

The company is a leading provider of cloud-based work solutions. It serves more than 50% of Fortune 500 companies, providing cloud-based enterprise solutions for human resources, financial planning and analytics.

Like many tech stocks, Workday has been hit hard in 2022, with its share price falling 48% year-to-date. However, the company’s fundamentals remain strong. Workday reported strong second-quarter results in August and is expected to report third-quarter results in mid-November.

Revenue continues to grow more than 20% year over year and now stands at $5.7 billion in the past 12 months. Of that $5.7 billion, $5 billion comes from subscription revenue. Additionally, in August, management reiterated its long-term goal of reaching $10 billion in annual sales.

WDAY data by YCharts

Workday continues to expand its customer base and recently obtained FedRAMP authorized status, which means the company can now sell its products to US government agencies.

All of this creates a great environment for Workday in 2023 – if the broader economy can pull itself together. Next year, the Federal Reserve is expected to move away from the massive interest rate hikes that have become the norm in 2022. Meanwhile, double-digit inflation will eventually moderate, relieving some of the pressure that held onto tech stocks this year.

And that’s why I think Workday is poised to take advantage of it. It’s a name investors should get to know now — before next year’s catalysts drive its stock up significantly.

This Internet Company Is Cutting Costs and Preparing for a Big 2023

Justin Pope (Sea Limited): E-commerce, payments and gaming company Sea Limited has been among the big winners of the pandemic, surging to a high of around 1,000% from its pre-pandemic price. But as they say, easy-going, easy-going. The stock has given up virtually all of those gains throughout 2022. Wall Street can be irrational at times, meaning it can overshoot both up and down.

You saw the example of the upside when the stock rose to a price-to-sales (P/S) ratio of 30, a valuation showing how far the stock price has outpaced the company’s growth for the pandemic. But today you see the opposite: the stock is trading at its lowest valuation, which might give someone the impression that Sea Limited is a struggling company.

Graph of the SE PS ratio

SE PS Ratio Data by YCharts

However, the data mostly disputes this. Sea Limited is generating more revenue than ever. The company has seen strong growth during the pandemic, including 158% year-over-year revenue growth in the second quarter of last year. But instead of falling after such a big jump, revenues rose another 29% in the second quarter of this year. Some may frown at what is technically a slower growth rate, but it signals that the COVID-19 boost was no fluke. We could even see growth resume next year when those tough 2021 growth comparables pass.

The company is not profitable, but invests heavily to finance its growth. Fortunately, management recognized the need to cut back on some and pulled back some of its Latin American expansion efforts. Sea Limited is well funded, with $7.8 billion in cash, so the company is on solid financial footing.

Sea has seen bumps in the road, but the car is still on track. Investors may backtrack on this idea if the company burns through its cash reserves without making significant progress towards making a profit. It’s burned $1.4 billion in the past year, so $7.4 billion should buy it some time. Assuming Sea Limited can continue to grow while reducing its cash burn, the dire valuation leaves room for upward movement once market sentiment improves.

10 stocks we like better than Shopify
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Jake Lerch has roles at Amazon and Workday. Justin Pope has no position in any of the stocks mentioned. Will Healy holds positions at Shopify. The Motley Fool holds positions and recommends Amazon, Sea Limited, Shopify and Workday. The Motley Fool recommends the following options: $1140 January 2023 Long Calls on Shopify and $1160 January 2023 Short Calls on Shopify. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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