Technology stocks have been bludgeoned this year, and there is a good chance that the carnage may carry over to 2023. Many of the top companies in the sector are announcing huge layoffs, and that rarely happens when things are going well. Notably the best-performing tech-centric stocks of the past decade — Facebook (now Meta Platforms), Amazon, Apple, Netflix and Google (now Alphabet), the so-called FAANG stocks — have all hit the wall from a growth standpoint and are among those laying off 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 next year. While all have the Buy ratings 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 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 announced last year 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 earlier this 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 $162 price target on Datadog stock. The consensus target is lower at $109.97, and the most recent close was at $72.42.
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 these three segments.
The Productivity and Business Processes segment offers Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, Microsoft Viva, and Skype for Business; Skype, Outlook.com, OneDrive and LinkedIn; and Dynamics 365, a set of cloud-based and on-premises business solutions for organizations and enterprise divisions.
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