After a disastrous 2022, investors are looking for some of the hottest stocks to buy for New Year 2023. Strategically, investors want to use the month of Dec. to take losses on positions while taking advantage of selling pressure on underperforming stocks. In fact, some of the top stocks to consider for New Year 2023, include:
Stocks to Buy: DXC Technology (DXC)
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DXC Technology (NYSE:DXC) is trading in deep value territory with a value score of 91/100. The company posted revenue of $3.57 billion, down by 11.4% year-over-year. DXC stock is so cheap that markets speculate a private equity firm will buy it out. DXC is an information technology services and consulting firm with a strong book-to-bill ratio of 1.04 times. It developed a new sales model to attract new work for its Global Business Services unit. Its Global Infrastructure Services enjoys over $9 billion in backlog. Investors should expect DXC to weather the upcoming economic slowdown.
DXC’s customers need analytics and engineering solutions. They need to invest in infrastructure and the modern workplace. In fiscal 2024, the company’s margins will improve. High capital expenditure levels in the current quarter will result in cash inflow from existing contracts. In Oct., Baring Private Equity Asia approached DXC for a takeover. If it offers the right price, investors will get quickly rewarded instead of waiting for the stock price to rebound in 2023.
Stocks to Buy: Meta Platforms (META)
Meta needs sustained advertising revenue to fund its metaverse development. Although that revenue source will slow, the tech sector will pivot toward augmented and virtual reality. According to IDC, worldwide spending on AR/VR will reach $13.8 billion in 2022. In 2026, spending will grow to $50.9 billion. The company’s early investments in this space might pay off for long-term shareholders.
To offset slower ad revenue on Facebook and Instagram, Meta could monetize Facebook Messenger and WhatsApp. In a company-wide meeting after announcing it would cut 11,000 workers, Zuckerberg said those apps are very early in monetizing. Amid getting used to higher costs from inflation, people will not think twice about paying for WhatsApp and Messenger.
Meta could bundle the messenger apps with fintech features. For example, after testing a payments tool in Brazil, Meta might roll out the launch worldwide in 2023, and could be one of the top stocks to buy for 2023.
Stocks to Buy: Photronics (PLAB)
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Photronics (NASDAQ:PLAB) is a semiconductor photomask manufacturer. In the third quarter, the company said that it expects revenue of between $205 million and $215 million. This was below consensus estimates. Investors who bought PLAB stock after the drop are up by around 22%.
In 2023, Photronics does not expect any slowdown for its mainstream product. However, customers pushed out orders in later quarters. Before the company recognizes those sales, it might re-forecast its guidance. PLAB scores a 96/100 on value, according to Stockrover. Investors who buy the stock should earn a decent return in the next year.
The company has capacity constraints in the global photomask industry to work through. Fortunately, if demand weakens slightly, it will not hurt results. Utilization for commercial photomasks will remain very high. Investors might bet on a less severe downturn in the current semiconductor cycle. Photronics is benefiting from an improvement in the pricing environment. CFO John Jordan said that benefits from firm pricing in its high-end business in Asia.
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Sea (NYSE:SE), a mobile game developer and e-commerce firm in Singapore, posted revenue growth in the third quarter. While gross profit topped $1.2 billion, it lost $569.3 million. CEO Forrest Li said the company shifted the company’s focus away from growth. Instead, it achieved self-sufficiency and profitability without relying on outside funding. SE stock recovered and is poised to trend higher from here.
Sea benefited from a higher take rate in its core marketplace revenue. It controlled costs by tightening expenses related to sales and marketing. In addition, it improved its logistics costs. As a result, Sea will operate more effectively as it sells more product units.
Free Fire, Sea’s online game, faces a slowdown in user and engagement growth. It will counter the headwinds by focusing on user engagement. In 2023, Sea will continue working with top game developers. This includes pivoting away from Riot Games. On its online platform, Shopee revenues will grow as sellers invest more in the platform.
StoneCo (NASDAQ:STNE) is a payment services provider in Brazil. Its steady uptrend should continue into 2023 when growth continues and profitability improves. In Q3, StoneCo posted a non-GAAP EPS of R$0.52. Revenue rose by 71% Y/Y to R$2.51 billion.
StoneCo is growing its market share. It has a disciplined pricing model that adjusts to the economic headwinds ahead. This year, it built new distribution channels. This gives it access to new markets such as the micro merchant segment. In the next year, StoneCo will create more distribution channels. As a result, it may allocate capital in areas that accelerate its growth.
In the software segment, StoneCo will explore opportunities in the core point-of-sales solution. It will not increase investments in POS and enterprise resource planning until valuations fall. 2023 is also a year of heavy investments balanced with cash flow generation. Investors should expect strong cash flow growth as Brazil’s GDP strengths.
Taiwan Semiconductor (TSM)
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Taiwan Semiconductor (NYSE:TSM) rose from a $59.43 low in Nov. 2022 when Warren Buffett disclosed a position.
TSM is bracing for a slowdown in semiconductor production. Smartphone and personal computer markets are soft. This caused its customers to delay the production schedule. In the current quarter and the first half of 2023, TSM will cut its utilization.
The longer-term outlook is brighter. Taiwan Semi is working with customers to manage the cyclical headwinds. It is preparing for a stronger pick-up in demand in the second half of 2023. In addition, TSM is working with its customers to develop specialty and differentiated technology. Demand for radio frequency and connectivity are a few technologies that will gain in momentum.
TSM will likely tighten its capital expenditure for 2023. It will align its capital spending with the weaker economy. This will result in consistent operating margin levels despite a slowdown.
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Zscaler (NASDAQ:ZS) is a cloud security firm. Zscaler posted revenue growing by 54.2% Y/Y to $355.5 million. For the full year of fiscal 2023, it will earn between $1.23 to $1.25 a share. In the lower end of the marketplace, the company is feeling the impact of a weaker macro environment. Fortunately, billings remain steady and slightly above their midpoint target.
The sales cycle elongated not because of an economic slowdown. Instead, Zscaler’s deal size is getting bigger. Customers are buying more solutions. Expect demand for its platform to widen. The company will expand its profits by increasing its pipeline. Its pipeline will increase to five regions.
Markets are bracing for an economic slowdown in the year ahead. Clients are adjusting capital expenditure and operating expenditure. Fortunately, they value Zscaler’s mission-critical product. Since it helps customers simplify and standardize operations, they save money with Zscaler’s solution.
On the date of publication, Chris Lau 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.
Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get actionable insight to achieve strong investment returns.