As investors have contemplated the possibility of a recession, the Nasdaq Composite has fallen 27% from its high, putting the tech-heavy index deep in bear market territory. Downturns of that magnitude can be a gut-wrenching experience for any investor, especially those who have never experienced a prolonged bear market before.
While it may seem like a small consolation, there is a bright side to the current downturn. Many high-quality stocks are trading at significant discounts to their historical valuations, and that creates buying opportunities.
Here are two growth stocks you'll regret not buying on the dip.
1. CrowdStrike Holdings: Protecting sensitive data and applications
CrowdStrike Holdings (CRWD 1.29%) is a market leader in several cybersecurity verticals, including endpoint (device) protection, managed services, and threat intelligence. The company owes that success to its cloud-native architecture, which allows its platform to analyze trillions of security signals each week. All that data makes its artificial intelligence (AI) engine uniquely effective in predicting and preventing cyberattacks, according to management.
That competitive edge has translated into supercharged financial results. CrowdStrike saw its customer count climb 57% in the past year, and 71% of those customers now use four or more software modules, up from 55% two years ago. That trend bodes well for the future, as each additional software product brings in more revenue and it makes the customer relationship a little stickier. On that note, revenue soared 64% to $1.6 billion over the past year, and free cash flow jumped 44% to $481 million.
Going forward, shareholders have good reason to be optimistic. Hackers have targeted several high-profile companies and government agencies in recent years, making cybersecurity a top priority for many businesses. Additionally, cloud adoption and the proliferation of connected devices are creating new vulnerabilities each day, reinforcing the need for effective cybersecurity. As an industry leader, CrowdStrike is well-positioned to benefit from that trend. Management values its market opportunity at $71 billion by 2024.
The stock is currently down 38.4% from its high, trading at 24.9 times sales. That may not be cheap, but it's a good deal cheaper than its three-year average of 37.9 times sales, which makes this a good time to buy a few shares.
2. The Trade Desk: Prepped for rapid growth
The Trade Desk (TTD 0.59%) operates the largest independent demand-side platform (DSP) in the digital ad industry. Its technology helps marketers plan, measure, and optimize data-driven campaigns across channels like desktop, mobile, and connected television (CTV). Better yet, The Trade Desk built its platform on bid factor technology, which empowers advertisers to fine-tune targeting parameters more easily than the line-item-based architecture used by other DSP vendors.
Additionally, The Trade Desk has distinguished itself from ad titans like Alphabet's Google in two key ways. First, as an independent company -- meaning it does not own any content platforms like Google Search -- The Trade Desk has no incentive to steer ad buyers toward specific ad inventory. Second, by focusing solely on the buy side of the equation, The Trade Desk does not have to balance the needs of buyers and sellers, meaning its values are better aligned with those of its customers.
Thanks to that advantage, tens of thousands of advertisers spend money on its platform, and the company has kept its customer retention rate over 95% over the last eight years, which has fueled consistently solid financial results. Revenue soared 44% to $1.3 billion over the last year, and free cash flow climbed 12% to $394 million. Even so, The Trade Desk has hardly scratched the surface of its addressable market, which will surpass $600 billion in 2022, according to eMarketer.
On that note, The Trade Desk recently formed key partnerships with Walmart and Walt Disney, which should accelerate growth in shopper marketing and CTV advertising, respectively. That's particularly noteworthy because shopper marketing is a $200 billion industry, and online video ad spend will hit $259 billion by 2025.
The stock is currently down 61% from its high, trading at 16.5 times sales -- far cheaper than its three-year average of 30.5 times sales. That's why investors should consider buying on the dip.