4 Growth Stocks to Buy and Hold in 2023

Susan Dziubinski: Hi. I’m Susan Dziubinski with Morningstar.

After a tough 2022, large-cap growth stocks have surged in 2023. The Morningstar US Large Growth Index is up more than 30% this year, versus a 15% return for the broad-based Morningstar US Market Index.

Today, we’re sharing a few large-cap growth stocks that we think still look undervalued. All of these stocks land in the large-cap growth portion of the Morningstar Style Box, and all of these stocks are also trading below Morningstar’s fair value estimates.

4 Growth Stocks to Buy and Hold in 2023

1. Moderna MRNA
2. Uber UBER
3. Yum China YUMC
4. Snowflake SNOW

The first stock on our list is Moderna MRNA. We don’t think Moderna has yet developed the competitive advantages to earn an economic moat rating. But we do think the biotech firm has strong potential for its mRNA technology across infectious diseases, cancer, and rare disease therapeutics. In fact, in a recent clinical trial, Moderna and Merck’s experimental cancer vaccine, used in combination with Merck’s Keytruda, reduced the risk of melanoma spreading to other parts of the body. That news only supports our bullish case for the stock. We think Moderna stock is worth $266 per share.

The next stock on our list is Uber UBER. Uber has become the largest on-demand ride-sharing provider in the world, with about 30% global market share, outside of China. We think the company has carved out a narrow economic moat, thanks to the network effect it achieves with both riders and drivers: As demand on the firm’s platform increases, consumer and driver acquisition costs decline. That network effect is driving top-line growth and margin expansion. We think Uber stock is worth $68 per share.

Next on our list of undervalued large-growth stocks to buy and hold is Yum China YUMC. Yum China is the largest restaurant chain in China, and it includes key concepts like KFC, Pizza Hut, and Taco Bell, among others. It’s the only company on today’s list that earns a Morningstar Economic Moat Rating of wide, thanks to its significant cost advantages and strong brand recognition. China’s reopening led to record revenue and profits for the company in the most recent quarter, and we expect Yum China to enjoy unit and margin expansion ahead. We think shares of Yum China are worth $84.

The last undervalued large-growth stock on our list is Snowflake SNOW. Snowflake is a data lake, warehousing and sharing company that counts nearly 30% of the Fortune 500 as its customers. While we think that Snowflake’s unique multi-cloud strategies allow the company to benefit from high switching costs and even a network effect, we don’t think the company has yet carved out an economic moat. And although existing customers exhibited slower spending growth in the most recent quarter—which led us to trim our fair value estimate—we still see ample upside here. We think Snowflake stock is worth $231.

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Morningstar strategist Karen Andersen, senior analysts Ali Mogharabi and Ivan Su, and analyst Julie Bhusal Sharma contributed the research behind this segment.

Watch “2 New Wide-Moat Stocks to Watch” for more from Susan Dziubinski.