2022 has been unkind to investors in growth stocks. Rising inflation, which is expected to lead to higher interest rates, has caused investors to run for cover. Many funds, especially those exposed to growth stocks, have taken losses. These include the SPDR S&P 500 Growth ETF (SPYG -0.24%) and Cathie Wood's ARK Innovation ETF (ARKK 3.45%), which are down 10% and 20% year-to-date, respectively. While some investors are running for the hills, others see this as an opportunity to make timely buys for the long term. The two companies below fit this bill.

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1. Amazon

Amazon (AMZN -0.15%) is truly a tale of two companies. The e-commerce business is experiencing severe headwinds, while other segments like Amazon Web Services (AWS) are thriving. The stock is down more than 6% year-to-date and more than 4% over the past year. 

The e-commerce portion of the business has butted up against the realities of COVID-19 in recent periods. First, the tight labor market in the U.S. has prompted the company to reward employees with bonuses and rising wages. This is important as the company needs a robust and committed workforce. However, ensuring that has added billions of dollars in costs. Next, supply chain bottlenecks have caused the company logistical headaches, which have added costs to the bottom line. As a result, the North American and international segments posted lower operating income than in 2020 despite rising sales.

These short-term headwinds may be clouding out the tremendously positive results posted by the AWS segment and the company's increasing advertising revenue. AWS has thrived in the current market, increasing revenue in 2021 to $62.2 billion, a 37% increase over 2020. Operating income for the AWS segment reached $18.5 billion on a robust 30% operating margin. Advertising sales exploded from $19.8 billion in 2020 to $31.2 billion in 2021. This fast-growing revenue stream should boost earnings and will further diversify the company's sales, thereby increasing the stock's value.

Amazon also recently announced the first rate increase in Amazon Prime since 2018. Now that the cost is going from $119 to $139 annually, Amazon should enjoy billions in extra income in the coming years. The company reports over 200 million Amazon Prime members. At $20 each, this amounts to $4 billion dollars in sales each year. Amazon has a highly profitable segment to carry it through the lean times in e-commerce. When the retail headwinds subside and the company is again running on all cylinders, there is a tremendous opportunity for earnings to multiply and the stock to beat the market

2. PagerDuty

Businesses are becoming more and more reliant upon digital operations to function. But what happens when incidents arise that must be dealt with quickly and efficiently? The correct teams must be notified, and action must be taken immediately to keep systems up and running -- this is where PagerDuty (PD 1.98%) comes in. The company's platform enables the automated assignment of incident responses and real-time tracking, so companies continue to run smoothly. It also offers preventative and predictive digital solutions. These solutions reduce downtime and enable faster troubleshooting. 

In one example, DraftKings (DKNG -2.25%) relies on PagerDuty to notify the correct teams and provide visibility and communication to handle incidents, such as website or application outages. Before PagerDuty, DraftKings had a team that was needed to constantly (and manually) monitor the system for problems, especially during game days. These individuals were forced to carry laptops all day long. As the company grew, more and more of these teams were needed and the engineers began to experience burnout. Now, PagerDuty's platform automates the process, alerts the proper individual, enables data-driven decision making, and problems are solved faster. This ultimately improves the DraftKings customer experience which is critical in its ultra-competitive industry.

PagerDuty was founded by software developers who envisioned a better way to tackle incident response operations. Their firsthand knowledge of the existing inefficiencies and the market's needs is a huge positive. These developers were once on call 24/7 to deal with outages or other instances and were tethered to their pagers. They were literally on "pager duty" as they called it. They realized that this system needed to be improved upon, especially with the growing complexities of online infrastructure. 

14,486 paying customers were reported by PagerDuty as of the third quarter of fiscal 2022. Of these, 543 provided revenues of more than $100,000 annually. This is an increase of over 35% from the previous year. The company also has thousands of non-paying customers. There is a clear opportunity to monetize these customers as they become reliant on the PagerDuty platform.

PagerDuty estimates a total addressable market (TAM) of $36 billion. This gives the company plenty of room to grow as it has forecasted $279 million in sales for fiscal 2022. PagerDuty is investing heavily in sales and marketing and is not yet generally accepted accounting principles (GAAP) profitable, and investors should be aware of this risk. The current market cap of $3 billion puts the price-to-sales (P/S) ratio at just over 11, which is lower than it has traded in recent months, as shown below. 

PD Chart

PD data by YCharts

The stock has experienced downward momentum, and the short-term price action is uncertain. However, this company has an opportunity to reward investors handily in the long term. PagerDuty continues to increase its base of customers, and these customers, like DraftKings, rely on the product to make their business run smoothly. Because of this, the product is very sticky. The investment in sales and marketing will help to continue to increase this base of customers and PagerDuty should profit in the long run.