Morgan Stanley’s 5 Stock Picks for 2023

In this article, we will take a look at Morgan Stanley’s top 5 stock picks for 2023. For more Morgan Stanley stocks, head on over to Morgan Stanley’s 15 Stocks Picks for 2023.

5. Palo Alto Networks, Inc. (NASDAQ:PANW)

Share Price Upside: 26%
Number of Hedge Fund Holders: 83

Palo Alto Networks, Inc. (NASDAQ:PANW) is one of Morgan Stanley’s top stock picks in the technology sector, engaged in providing cybersecurity solutions. It offers firewall appliances and software security management solutions or the global control of network security platforms. Palo Alto Networks, Inc. (NASDAQ:PANW) also offers subscription services covering threat protection, malware, and persistent threats.

Palo Alto Networks, Inc. (NASDAQ:PANW) has gained over 78% year to date, outperforming the overall market. The outperformance comes from growing demand for the company’s solution and integration of artificial intelligence. Palo Alto Networks, Inc. (NASDAQ:PANW) also announced it is building a cloud service infrastructure in Switzerland. Morgan Stanley analysts raised their price target on the stock to $302, implying a 26% upside potential.

Palo Alto Networks, Inc. (NASDAQ:PANW) had 83 hedge funds out of the 910 that Insider Monkey followed as investors by June 2023. The hedge fund with the remarkable holding in the company was 

ZWEIG DIMENNA PARTNERS, run by Joe Dimenna, with a stake worth $5.47 million.

In its Q2 2023 investor letter, TimesSquare Capital U.S. Mid Cap Growth Strategy offered the following insight regarding Palo Alto Networks, Inc. (NASDAQ:PANW):

“Another area of strength was the Information Technology sector. At the lead was a 28% gain from Palo Alto Networks, Inc. (NASDAQ:PANW). A global provider of network and cloud-based cybersecurity systems, Palo Alto’s revenues and earnings were higher than anticipated, which led management to increase its guidance for the balance of the fiscal year. Palo Alto’s billings rates grew faster than expected—especially for its Next-Gen Security platform—while at the same time the company’s margins strengthened. As its shares climbed, we trimmed our position.”

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4. Amazon.com, Inc. (NASDAQ:AMZN)

Share Price Upside: 31%
Number of Hedge Fund Holders: 278

Amazon.com, Inc. (NASDAQ:AMZN) is one of Morgan Stanley’s top stock picks in the consumer cyclical sector as analysts remain bullish about its cloud services and prime membership. Headquartered in Seattle, Washington, it is best known for offering an e-commerce platform for connecting merchants and consumers. It also operates a cloud unit that offers various solutions, including computing storage and analytics.

Amazon.com, Inc. (NASDAQ:AMZN) is up by more than 40% for the year, benefiting from solid consumer spending power. Morgan Stanley has a $173.31 price target on the stock, implying a 31% upside potential. By June 2023, 278 hedge funds out of the 910 that Insider Monkey followed had invested in Amazon.com, Inc. (NASDAQ:AMZN)’s shares.

Here is what White Falcon Capital Management said about Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2023 investor letter:

“There are comparable narratives involving NU Holdings, Amazon.com, Inc. (NASDAQ:AMZN), and Teck Resources, to name a few holdings from the White Falcon portfolio. Amazon constructed its logistics network and cloud computing infrastructure using yesterday’s currency, but it is poised to capitalize on this network with the inflated dollars of tomorrow. In essence, we believe we hold wonderful businesses with growing revenue streams and potential for operating leverage – all at reasonable valuations.”

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 3. Thermo Fisher Scientific Inc. (NYSE:TMO)

Share Price Upside: 43%
Number of Hedge Fund Holders: 103

Thermo Fisher Scientific Inc. (NYSE:TMO) is one of Morgan Stanley’s top stock picks for 2023. It offers life science solutions, analytical instruments, and speciality diagnostics products. The company provides reagents, instruments, and consumables for biological and medical research, discovery, and production of drugs and vaccines.

While Thermo Fisher Scientific Inc. (NYSE:TMO) has pulled back significantly, it remains one of Morgan Stanley’s top picks on a discount. The investment firm maintains a $633 average price target on the stock, implying a 43% upside potential.

In Q2 2023, 103 hedge funds out of the 910 that Insider Monkey polled had invested in Thermo Fisher Scientific Inc. (NYSE:TMO)’s shares. In the third quarter of 2023, the hedge fund with a prominent holding in the company was Levin Capital Strategies, led by John A. Levin, with a stake of $3.29 million.

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2. Zoetis Inc. (NYSE:ZTS)

Share Price Upside: 57%
Number of Hedge Fund Holders: 65

In the healthcare sector, Zoetis Inc. (NYSE:ZTS) discovers, develops and commercializes animal health medicines, vaccines and diagnostic products. It mostly deals with products across species, including livestock, swine, poultry, fish, sheep, etc.

Morgan Stanley analyst Erin Wright remains upbeat about Zoetis Inc. (NYSE:ZTS); up by about 7% for the year, aligning with the 85 S&P 500 gain. The analysts maintain a Buy rating with a $248 price target, implying a 57% upside potential.

Out of the 910 hedge funds that Insider Monkey surveyed, 65 had invested in the company’s shares by June 2023. The hedge fund with the prominent stake in Zoetis Inc. (NYSE:ZTS) was Bailard Inc., run by Thomas Bailard, with a $9.67 million holding.

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1. Five9, Inc. (NASDAQ:FIVN)

Share Price Upside: 61%
Number of Hedge Fund Holders: 45

Together with its subsidiaries, Five9, Inc. (NASDAQ:FIVN) provides intelligent cloud software for contact centers. It offers a virtual contact center platform that delivers applications that enable contact center-related customer service sales and marketing functions.

In a research note to investors, Morgan Stanley reiterated that Five9, Inc. (NASDAQ:FIVN) is one of the software winners amid the AI revolution. The technology will enhance the company’s call and contact center services. Five9, Inc. (NASDAQ:FIVN) boasts an average price target of $92.67, implying a 61% upside potential.

At the end of Q2 2023, 45 hedge funds were eager on Five9, Inc. (NASDAQ:FIVN), compared to 41 in the previous quarter. Of those, Sylebra Capital Management was the largest shareholder in the company and disclosed a position worth $210.73 million.

In its Q2 2023 investor letter, ClearBridge SMID Cap Growth Strategy provided the following insight regarding Five9, Inc. (NASDAQ:FIVN):

“Stock selection in the IT sector was the leading detractor from relative performance during the second quarter. Customer reticence to commit to incremental seats/contract duration or new products during the macro slowdown is understandable and predictably weighed on companies across the sector but was particularly detrimental to software providers such as Five9, Inc. (NASDAQ:FIVN), which provides cloud-based software for call centers as well as Wix.com, which operates a cloud-based platform for website creation and applications. While we made the decision to exit Five9 during the quarter over concerns surrounding the possible headwind posed by AI development and integration, we continue to have high conviction in our IT companies.”

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