Technology stocks were bludgeoned in 2022, leaving the tech-heavy Nasdaq down a stunning 33% last year. There is a good chance that some of the carnage may continue throughout 2023. Many of the top companies in the sector are still announcing huge layoffs, and that rarely happens when things are going well.
In addition, the stocks that led the way over the past five to 10 years, notably the FAANG stocks — Facebook (now Meta Platforms), Amazon, Apple, Netflix and Google (now Alphabet) — have almost all hit the wall from a growth standpoint and are among those laying off huge numbers of employees.
So what should aggressive growth investors do when it is possible that new leaders in the sector are offering some bigger and better growth potential? We decided to screen the Goldman Sachs Conviction List for the firm’s top technology ideas and found five leading companies (including one legacy heavyweight) that could be poised to lead the way higher over the rest of the year.
While all these stocks carry a Buy rating at Goldman Sachs, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Datadog
This is a name some investors may not be as familiar with, but it holds tremendous upside potential. Datadog Inc. (NASDAQ: DDOG) engages in the development of monitoring and analytics platforms for developers, information technology operations teams and business users. The company’s platform integrates and automates infrastructure monitoring, application performance monitoring and log management to provide real-time observability of its customers’ entire technology stack.
Datadog recently announced the extension of Network Performance Monitoring (NPM) to Windows. Datadog NPM now monitors the performance of network communications between applications running on Windows Server and Linux, providing seamless network visibility across cloud environments, on-premises data centers and operating systems.
The analysts noted last year that, based on the strength of its expanding product portfolio that addresses critical aspects of customers’ cloud migration, coupled with a solidly profitable business model that generates rising free cash flow margins alongside hyper-growth, Datadog is poised to grow into a preeminent infrastructure software business.
Goldman Sachs has a $114 price target on Datadog stock, well above the $102.69 consensus target and Tuesday’s closing share price of $72.52. Hitting the Goldman Sachs target would be a 45% gain.
Microsoft
This is a more conservative way for investors to participate in the massive cloud growth. Microsoft Inc. (NASDAQ: MSFT) develops, licenses and supports software, services, devices and solutions worldwide. The company operates in the following three segments.
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