2022 has been a year to forget, especially for (formerly) highly rated stocks in fast-growing companies. While the MSCI World fell 20%, many high-flying stocks fell 40% and more due to high valuations and rising interest rates (as of December 27, 2022). This is also the case for the following three stocks, where operational activity continued to develop well. So I can well imagine that equities will outperform the broader market in 2023.
IT service provider Bechtle (WKN: 515870) performed well in the first nine months of 2022 despite macroeconomic challenges. Sales increased by 12% and EBIT by 9%. Germany’s largest systems company is thus building on the strong development of previous years. Since 2017, sales have increased by an average of 14% per year and EBIT by 19% per year.
Still, the stock price has fallen 47% since the start of the year. The P/E is now “only” 18. Measured by the trading outlook for 2023 and beyond, I find this too cheap. The digital transformation of companies is in full swing. Technical solutions are becoming increasingly complex. Therefore, the support of external IT service providers such as Bechtle is essential in many cases. While IT component delivery issues and a weak overall economic environment could have a negative impact in the short term, I believe Bechtle stock will once again become a top-tier stock in 2023.
data dog (WKN: A2PSFR) helps customers monitor the growing number of applications and processes in the cloud. The company has been running like butter for many years. The strong growth has also continued over the last twelve months. Revenue increased 74% and free cash flow increased 45%.
Yet its share price has fallen 56% since the start of the year. However, the stock is still not cheap. There is no P/E due to the lack of profits. Based on the expected numbers for this financial year, the KUV is 14, the free cash flow multiple is 63.
I see a continued tailwind in monitoring and troubleshooting increasingly complex cloud computing landscapes for 2023 and beyond. Datadog seems to me well positioned to capitalize on this and continue to push into adjacent areas. So I can well imagine that the share price will go up again in 2023.
With less than 70% since the start of the year, the shares of MatchGroup (WKN: A2P75D) crashed this year. The shares are now trading where they were at the end of 2018. However, the leader in online dating (with brands like Tinder and Hinge) has come a long way since then. Revenue has increased by an average of 22% per year over the past five years and operating profit has increased by 24% each year. This good development continued in the first nine months of 2022. Revenues increased by 10%, profit fell by 38% due to a one-time special impairment.
As online dating continues to be a growth market, I see the company in a strong position for 2023. The new CEO, who joined game developer Zynga mid-year, appears to have a strategy clear. Growth needs to be spurred in Asia in particular, while niches such as Christian dating apps or career-focused singles need to be served even more in established markets. At the same time, more attention should be paid to costs and previously unsuccessful projects such as dating solutions for the metaverse should be curtailed for the time being. This all seems reasonable to me. A valuation with a free cash flow multiple of 14 seems too low to me.
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Hendrik Vanheiden owns shares in Datadog and Match Group. The Motley Fool owns shares of and recommends Datadog and Match Group.