Academy News Top 3 stocks for December 2022

Top3 stocks for December 2022

Published: 13.01.2023

While investors are calling 2022 one of the worst years to invest in stocks, active traders see it exactly the opposite. That's because whether markets rise or fall, you can speculate and potentially profit from both. Here is a summary of the 3 stocks that were the most traded among Purple Trading clients in the last month of 2022.

The year 2022 has literally brought a harvest to active traders. The stock markets had one of their worst years ever - if you look at the S&P 500 index, it lost nearly 20% for the year, the seventh worst performance on record. Moreover, all the indications are that 2023 could be no less wild. The focus of all investors will be on economic results, which are expected to suffer considerably this year. Take a look at the most traded CFD stocks at Purple Trading for December. Could they be interesting this year?

Meta - the technology winner of 2023?

The year 2022 was literally a disaster for Meta, when it wrote off two-thirds of its capitalisation. Investors are certainly not used to this kind of development - Meta was literally the best technology stock in history. However, the huge rise was replaced by a terrible fall. This was mainly due to investor impatience with Metaverse, which is proving to be a failed project. Thus, Meta was literally ahead of its time, and while Metaverse may be the music of the future, the world may not be ready for it at the moment. Let's recap the company's last published results, for the third quarter of 2022.

3Q revenues were down 4.5% year-on-year, mainly due to a decline in ad interest. The average price per ad fell 18% year-on-year, but Alphabet and Snapchat reported similar trends. However, the aforementioned companies do not have a ball at their feet called Metaverse. The latter is proving to be a literal money-burner. Meta has already invested over USD 30 billion in it and the investments are expected to grow this year. According to estimates, Meta is expected to send over USD 19 billion into it this year, which is a huge amount. However, investor and user interest in the Metaverse is rapidly waning, something Meta apparently doesn't want to admit. However, abandoning the project would be a big loss, which Mark Zuckerberg is not used to. However, everything was not just negative - at least the figure discussing the number of daily active users was seen as relatively positive. This reached 1.98 billion. Instagram set a record, exceeding 2 billion daily active users for the first time in its history.

_{Meta shares in the MT4 platform on the D1 timeframe along with the 50 and 100 day moving averages}

What to expect in the coming months?

Meta will announce its financial results for the last quarter of 2022 in early February. What can we expect? The last quarter is likely to be disappointing again, we expect a year-on-year decline in sales again. While these should reach a respectable USD 30 billion, the market was expecting up to USD 2 billion more. The last quarter of the year tends to be the best for both Facebook and Instagram due to the growth in interest in ads. However, Meta is facing competition in the form of TikTok, which is seeing huge growth in interest.

However, Meta is not slowing down and has brought the short video format to Instagram. The videos, called Reels, are enjoying a lot of user interest. In addition, Chinese TikTok is still facing regulatory pressure in the US. The weakening US dollar could also be a positive, boosting foreign sales. Towards the end of the year, Meta also announced broad layoffs (around 13% of the workforce), which were received rather positively by the market. The redundancies are expected to include employees working at Metaverse. Thanks to the factors mentioned, Meta could be one of the technology winners of 2023, but again we can expect a lot of volatility.

Will Tesla make it over the bumps?

Shares of the Californian carmaker had a literally horrific end to the year, falling by around 40% during December. Not surprisingly, however, the company's capitalization has been highly overvalued for a long time, and Tesla is also broadly overvalued due to several factors. The first was the closures in China, where Tesla produces the bulk of its cars. Tesla also does not benefit from the factor of high interest rates, which reduce the ability of consumers to take out loans. Tesla's cars tend to be among the more premium ones, and in a period of belt-tightening we are more likely to settle for a used car.

Nor must we forget the factor of high inflation, which makes materials more expensive, and the still relatively strong US dollar, which reduces foreign sales. And we must also add Elon Musk's divestment of Tesla shares, motivated by his ability to finance his purchase of Twitter. So the aforementioned factors are literally an explosive mix that has sent Tesla stock to $100.

_{Tesla shares in the MT4 platform on the H1 timeframe along with the 50 and 100 day moving averages}

What to expect in the coming months?

Tesla's financial results for the last quarter of last year will be released on January 25th, but it's not expected to be miraculous. The carmaker has traditionally released the numbers of cars delivered and produced, and both figures remained far below expectations. Tesla delivered 405,000 new cars, but the market was expecting 427,000. The company then produced 439,000 new cars - a record number, but Tesla has never seen such a large gap between the cars delivered and produced.

In addition, the company is struggling with a decline in interest in its cars in China. So it has decided to take the rather drastic step of making the Model Y and 3 cheaper. As a result, the Model Y is now 43% cheaper in China than in the US and the Model 3 is 30% cheaper. Will this also lead to cheaper cars in the US? The automaker may have no choice.

So 2023 looks set to be a very difficult year for Tesla. Even the record numbers we can expect every quarter are unlikely to be enough for the market. Competition is growing rapidly in the electric car market and Tesla is gradually losing its privileged position. Moreover, Elon Musk's army of admirers seems to have empty pockets, and a similarly extreme rise in Tesla shares as we have seen in recent years would be a big surprise this year.

Tesla may thus become one of the companies that will take many years to return to its peak levels of early 2022, if ever. A similar example may be Intel, which still hasn't surpassed its 2000 peak. It is even currently trading several tens of percent lower. On the plus side for Tesla, at least the opening up of the Chinese economy and the end of drastic measures against the coronavirus. So is the weakening US dollar. But 2023 will definitely be full of bumps for Tesla, and Tesla is likely to continue to be a haven of volatility.

Zoom - overpriced or underpriced?

Zoom Communications can also be described as the kingdom of volatility, with a 63% drop in value last year. Such a fall was probably inevitable, after the rocketing Zoom shares shot up during the coronavirus. The current share price is comparable to that of early 2020. Adapting to a world without a coronavirus is extremely difficult for Zoom, and the company is thus facing a harsh reality. So can Zoom be described as a "one trick pony" - a company that no longer has anything to offer long-term investors and is thus still overvalued? Or can the current price be attractive for long-term portfolios?

_{Zoom Communications shares on the MT4 platform on the D1 timeframe along with the 50 and 100 day moving averages}

The company's third-quarter results would suggest the former. The numbers themselves weren't that bad - earnings per share of $1.07 were well ahead of market expectations, and sales of $1.1 billion matched market expectations. What investors don't like, however, is the downgraded outlook for the next quarter or full year. Zoom is expected to end 2022 with revenue of $4.37 billion, which is less than the company itself and analysts had estimated. It is very hard for Zoom to find new clients, the number of subscriptions through the web is even decreasing. We can expect financial results for the last quarter of 2022 at the end of February.

In addition, Zoom has a very strong competitor in the form of one of the largest companies in the world - Microsoft. Its Teams are stealing a large part of Zoom's clients. We must also not forget the competition in the form of Cisco and Google. However, the aforementioned companies definitely have much more to offer investors. Zoom's stock, however, could be helped by a new mutation of the coronavirus called Kraken. It is spreading rapidly virtually worldwide and could once again spread work from home. However, the coronavirus is more of a factor that the world is learning to live with and a significant recovery in Zoom shares is thus unlikely. Zoom is therefore definitely not a "buy" and it would probably take a miracle to make a difference.

Top3 stocks for December 2022

Meta - the technology winner of 2023?

What to expect in the coming months?

Trade CFD stocks with Purple Trading

Will Tesla make it over the bumps?

What to expect in the coming months?

Zoom - overpriced or underpriced?

Newsletter subscription