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3 Top Growth Stocks to Buy and Hold in 2023

The long-term outlooks for these companies solid—and their stocks are cheap.

After a long stretch of outperformance, growth stocks took it on the chin in 2022: The Morningstar US Growth Index lagged the Morningstar US Value Index by nearly 36 percentage points last year.

Have growth stocks bottomed? Maybe, or maybe not. Morningstar expects that the economy will be stagnant—or even recessionary—in the first half of 2023. As a result, we think volatility will persist during the first couple of quarters this year.

But for patient investors who can ride out volatility, many growth stocks with solid fundamentals are trading well below what we think they’re worth. Here are three growth stocks that are among Morningstar analysts’ top picks for the first quarter of 2023.

3 Top Growth Stocks to Buy and Hold in 2023

These 4- and 5-star stocks are considered undervalued.

  1. Alphabet (GOOG)
  2. Salesforce (CRM)
  3. ServiceNow (NOW)

First is Alphabet GOOG. Advertising revenue has softened along with the economy, which has stung Alphabet. However, we think improvements in the macroeconomic environment later this year (assuming they materialize) could push up the shares of Alphabet. The firm’s Google and YouTube platforms continue to attract a wide swath of advertisers. The changes in Apple’s iOS policies regarding data privacy and security haven’t affected Alphabet as much as they’ve affected the likes of Meta META and Snap SNAP. Plus, the cloud business continues to grow toward profitability, which will make the company less reliant on the ad market over time. We think shares are worth $160.

Next is Salesforce CRM. Our analysts think Salesforce represents one of the best long-term growth stories in large-cap software, thanks to the company’s expanding portfolio of complementary solutions that allows clients to completely embrace their customers and build relationships, strengthen retention, and drive revenue. We expect Salesforce to benefit even more from natural cross-selling among its clouds, upselling more robust features within product lines, pricing actions, international growth, and continued acquisitions such as the recent deals for Slack and Tableau. We think shares are worth $220.

Lastly, there’s ServiceNow NOW. ServiceNow has mastered what’s called the “land and expand” strategy by leveraging its strength in workflow automation to deepen its relationship with clients with additional IT, HR, customer service, and other back-office products. In fact, we think ServiceNow has become a key partner in digital transformation, given its elite retention statistics. We’re also impressed with ServiceNow’s excellent balance between strong and highly visible revenue growth and robust margins. We think shares are worth $640.

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Morningstar directors Brian Colello and Mike Hodel and senior analysts Ali Mogharabi and Dan Romanoff provided the research behind this segment.

Susan does not own any securities mentioned in this video.

Watch 3 Cheap Value Stocks for 2023 for more from Susan Dziubinski.

Susan Dziubinski does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.