The technology-focused Nasdaq 100 index has spent the majority of 2022 trading in bear market territory, but it has staged a convincing rebound over the past week and a half with a 9.7% gain from its low point.
Many individual tech stocks are still heavily beaten down, but if this is the beginning of a broader recovery, that may not be the case for much longer.
There are still some risks on the horizon with the U.S. Federal Reserve set to continue increasing interest rates, which could lead to an economic slowdown. But here are two stocks down over 60% from their all-time highs, making them a great value regardless.
1. The case for DigitalOcean
Cloud computing is one of the most transformative modern day technologies. It helps companies migrate their operations online to speed up processes and connect their organizations across borders. It enables employees to work collaboratively, even if they're not in the same office -- or the same country.
The cloud services industry is dominated by trillion-dollar giants like Amazon and Microsoft, but DigitalOcean (DOCN 0.80%) has found an edge by focusing on small to mid-sized business customers with under 500 employees. It's a segment of the market that larger players pay less attention to, but DigitalOcean is catering to their needs on price, service, and ease of use.
The company's platform offerings start at $0 to $15 per month depending on configuration, making it the perfect choice for start-ups and small enterprises. Plus, its range of simple, one-click deployment tools can eliminate the need for dedicated technical staff, which is a big cost saving for early stage businesses.
DigitalOcean now serves 623,000 customers, and over the last 12 months, it has generated $462 million in revenue, a 36% jump year over year. Its net dollar retention rate also reached an all-time high of 117% last quarter, meaning existing customers spent 17% more with the company than they did in the prior-year period, which is a great measure of satisfaction.
But DigitalOcean's future potential is the most exciting part. The company places its addressable opportunity at $72 billion in 2022 but expects that to more than double to $145 billion by 2025. Its annual revenue so far suggests it has only captured a fraction of that market, so there's likely major growth ahead.
2. The case for Sea Limited
Sea Limited (SE 4.34%) operates in three high-growth segments of the digital economy: digital entertainment, e-commerce, and payments. The company delivered spectacular financial results during the pandemic as consumers were spending more time and money online, but it now has to adjust to a global economy that is returning to normal. Investors have tempered their growth expectations and sent Sea Limited stock down 78% in the last 8 months, but its long-term trajectory remains incredibly strong.
The company's largest segment is e-commerce, and it's driven by Shopee, which in the first quarter was the most downloaded app globally in the shopping category. It's a hybrid business-to-consumer and consumer-to-consumer sales platform, and it has the most active user base of any shopping app in all of Southeast Asia. In the first quarter, it processed 1.9 billion orders worth $17.4 billion with the former up 71% year over year.
The company's digital entertainment segment is headed by Garena, a game development studio responsible for the popular Free Fire battle royale mobile title. It's Sea Limited's second-largest revenue source behind e-commerce, though it is experiencing a dip in users right now. It's partially because of global economic reopenings and also due to Free Fire's recent ban in India, which Sea Limited is still attempting to resolve.
As a whole company, Sea Limited generated $10 billion in revenue during 2021, up a whopping 127% compared to 2020. But investors' recent pessimism in Sea Limited stock likely stems from the potential revenue-growth slowdown in 2022 to a more sustainable 34%, according to analysts. No company can sustain triple-digit growth forever.
But there's reason for investors to be more optimistic over the long term. By 2024, the broad Asia region is expected to generate $1.92 trillion in annual online sales, representing 61% of the global market opportunity. Considering Shopee's existing dominance in that territory, Sea Limited's largest business unit is well positioned for success.
