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Best-Performing Stocks of Q1 2023

Nvidia, Meta Platforms, and Salesforce were among the stocks that returned with vigor during the first quarter.

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Beaten-down technology and communications services stocks roared back to life in the first quarter of 2023, leading a list of best-performing stocks that includes Nvidia NVDA, up 90.1%, and Facebook parent Meta Platforms META, which jumped 76.1%. Other big winners: Warner Bros. Discovery WBD, up 59.3%, and Coinbase Global COIN, which rallied 90.9%.

Overall, among the 844 U.S.-listed stocks covered by Morningstar analysts, 525 rose, while 319 fell. In contrast, in 2022, 236 U.S.-listed stocks covered by Morningstar rose, while 608 were down.

Best-Performing Technology Stocks

When it came to first-quarter stock performance, technology companies were back in the limelight. After brutal losses last year, tech stocks surged, rallying on better-than-expected earnings results and demand, effective cost-cutting strategies, and enthusiasm for artificial intelligence.

The best-performing U.S.-listed stock covered by Morningstar analysts was Fastly FSLY, a cloud computing services provider, which rallied 116.8% during the first quarter. The catalyst for Fastly’s jump was a positive response by investors to its efforts in cost control, which Morningstar equity analyst Matthew Dolgin says was the “biggest question weighing on the stock in 2022.”

Dolgin says there are signs that Fastly has started to get its expenses under control. “Margins in the fourth quarter improved significantly from earlier in the year, and management’s 2023 guidance implies the firm will be moving quickly toward profitability,” he says. The company reported a loss per share of $0.08 in its fourth-quarter earnings results, better than the consensus estimates of a $0.13 loss per share, which helped spark its stock surge.

Shares of Nvidia and Advanced Micro Devices AMD rallied as investor interest in artificial intelligence bubbled over, adding to momentum from positive fourth-quarter earnings surprises. Both companies produce graphics processing units, critical technology used to power learning language models such as OpenAI’s ChatGPT and other artificial intelligence workloads.

“We believe AI models like ChatGPT use thousands of GPUs to be trained,” says Morningstar strategist Abhinav Davuluri.

Nvidia’s 90.1% gain and was the third-best performer of the quarter in Morningstar’s coverage list. AMD likewise rose 51.3% and is ranked 17th.

Salesforce’s CRM fourth-quarter results helped kick off the jump that led it to gain 50.7% on the quarter. On top of strong revenue growth during the fourth quarter that topped the company’s high end of guidance, the company’s recent actions to reduce headcount and close offices helped boost profitability metrics.

“The firm achieved a non-GAAP operating margin of 29.2%, versus 15.0% last year and our near consensus estimate of 21.8%. Management previously guided for 25% margins in fiscal 2026 but now believes it will achieve 27% in fiscal 2024,” says Dan Romanoff, Morningstar senior equity analyst.

A table of the best performing U.S.-listed technology stocks covered by Morningstar analysts.

Best-Performing Communication Service Stocks

Leading gains among communication services names was 2022 stock market pariah Meta Platforms. After shedding 64.2% in 2022, shares jumped 76.1% during the first quarter of 2023. The social-media stock remains 44.5% below its last high on Sept. 7, 2021.

For the first time in several quarters, Meta delivered favorable news to shareholders during its fourth-quarter earnings call. The company reported user engagement growth of 4% in Facebook and 5% in its Family of Apps, which include WhatsApp, Instagram, and Messenger.

Higher engagement led to higher ad impressions, which contributed to increased revenue. Morningstar senior equity analyst Ali Mogharabi sees the company as “well-positioned to return to growth, likely in the second half of this year.”

A return to revenue growth, along with Meta’s efforts to reduce costs by cuttings its headcount, consolidating offices, and restructuring data centers to be more efficient, should “drive margin expansion beginning in 2024,” Mogharabi says.

Additionally, news that President Joe Biden may ban rival app TikTok provided another tailwind for Meta’s stock price in the final weeks of the quarter. A ban could push users and content creators to expand their presence on other social-media platforms. “If a ban is approved and enforced, the content, user count and engagement, and likely ad dollars for Snap, Instagram, and YouTube will increase,” says Mogharabi.

Music streaming platform Spotify Technologies SPOT stock rallied after it reported monthly active users and premium subscribers growth stronger than what was expected, which “bodes well for Spotify’s revenue in 2023 and beyond,” says Mogharabi. Monthly active users hit 489 million, up 20.4% from a year prior. Revenue generated from premium subscriptions grew 18.4% year over year, while ad revenue grew 14%. Shares rose 69.3% during the quarter.

A table of the best performing U.S.-listed communication services stocks covered by Morningstar analysts.

Entertainment and Media Stocks Surge

Companies in the entertainment and multimedia industries within the communication services sector also bounced back during the first quarter of 2023. Stocks such as Warner Bros. Discovery, Roblox RBLX, and Roku ROKU were among the top performers during the quarter, after several rocky quarters that led to the three companies losing almost 60% or more during 2022.

Warner Bros. Discovery had a decent end to the year, says Morningstar senior analyst Neil Macker. Fourth-quarter results showed the company’s efforts to reduce costs paying off, with adjusted EBITDA only falling 2% despite total revenue declining 9%.

The company’s video game segment also had a blockbuster release in its Harry Potter game Hogwarts Legacy, which launched in early February and made over $850 million during its first two weeks. Warner Bros. Discovery’s stock rallied 59.3% during the quarter.

In the case of Roblox and Roku, both impressed investors in part because of positive surprises in user metrics.

Roku’s fourth-quarter results showed revenue clocking in at $867 million, ahead of the firm’s $800 million guidance. The firm also reported net new account activations of 4.6 million, which is “tied for the second strongest behind the pandemic-influenced fourth quarter of 2020,” says Macker. Shares were up 61.7% during the first quarter of 2023.

Roblox reported signs of continued growth in both daily active users and bookings in its monthly updates. As of February, Roblox reported daily active users rising to 67.3 million, up 22% year over year. The stock gained 58.1% in the first quarter.

The company’s bookings also continue to show strong growth, exceeding total bookings from 2019, says Morningstar’s Macker. February metrics showed bookings are up between 20% to 22% year over year.

A table of the best performing U.S.-listed media and entertainment stocks covered by Morningstar analysts.

Best-Performing Stocks of Q1 2023

Other stocks making major gains during the first quarter include cryptocurrency exchange Coinbase Global and Tesla TSLA, reversing a portion of their significant losses from 2022.

Coinbase shares jumped 90.9%, led by a surge in cryptocurrency prices during the quarter. Bitcoin prices rose 72.1% in the first quarter, followed by ethereum, which jumped 52.2%.

Tesla stock started its rally early in the year after the firm announced vehicle delivery guidance for 2023 of 1.8 million, which would be a 40% increase from 2022. Tesla also lowered prices at the start of the year, which should help the company “see strong growth demand even in an economic slowdown, particularly from the United States,” says Morningstar strategist Seth Goldstein. Tesla stock finished the quarter up 68.4%.

Other stocks posting big gains during the quarter included Southeast Asia-focused e-commerce platform Sea SE, which surged 66.4% as investors rewarded the company’s first-ever profitable quarter. The company improved monetization by 300 basis points in addition to meaningfully cutting costs through mass layoffs, says Morningstar senior equity analyst Kai Wang.

Shares of biotech firm Seagen SGEN also surged 55.8% on news that Pfizer PFE would acquire the company in a $43 billion deal.

A table showing long-term returns of the best U.S.-listed stocks covered by Morningstar analysts in Q1 2023.

The author or authors own shares in one or more securities mentioned in this article. Find out about Morningstar’s editorial policies.

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