Investing in growth stocks has been a painful experience for the last two years. Well before the broad market peaked at the end of 2021, many smaller software and technology stocks took a beating and are down as much as 50%, 70%, and in some cases more than 80% from all-time highs.

While not a fun experience if you own these companies, major dips can provide rare buying opportunities with stocks trading at significant discounts.

Here's why both Spotify Technology (SPOT 1.14%) and Wix.com (WIX -0.16%) are once-in-a-generation buying opportunities right now. 

A leader in audio streaming

Spotify has hundreds of millions of users around the globe (it operates in every large market except China). The audio streaming service, which offers ad-free music subscriptions as well as access to millions of podcasts, has steadily grown in popularity over the last decade.

Last quarter, there were 433 million monthly active users (MAUs) across Spotify's service and 188 million premium subscribers. This is up from only 180 million MAUs and 83 million premium subscribers in the same quarter in 2018.

Management thinks that the service still has lots of room to expand as digital audio streaming grows around the globe. By 2030, they want 1 billion or more people regularly using Spotify, or more than double the count today. This might seem like an ambitious goal, but if a few billion people use audio streaming services outside of China by 2030 and Spotify is able to retain its current 32% market share in music streaming, 1 billion MAUs is not out of the question.

With this steady user and subscriber growth, Spotify has been able to consistently grow its gross profit since going public a few years ago. Last quarter, it dipped in dollar terms due to foreign exchange rates and heavy investments in podcasts. Foreign exchange developments are outside of the company's control, but the podcasts' impacts on gross margin should start to abate in 2023 once it starts scaling up its podcast advertising marketplace around the world. 

Spotify has seen tons of success since it started to invest in the podcast market a few years back. It now has more podcast listeners than Apple Podcasts in the U.S. and built a fast-growing advertising marketplace that helped accelerate its advertising segment, with revenue growing 31% year over year last quarter. Next, management wants to build a new audiobook product within the Spotify app, with a service supposed to be coming to market sometime this year.

Spotify is not profitable, making it impossible to value with a price-to-earnings (P/E) ratio. But with the stock down around 60% in the past year, shares look to be trading at a big discount. With a market cap of $19 billion, the stock's trailing price-to-gross profit (P/GP) is 6.1, which is only slightly higher than the 5.45 average for the S&P 500. With consistent revenue growth (23% last quarter), a large market opportunity to go after, and new opportunities in podcasts and audiobooks, Spotify stock looks like an incredible buy at these levels. 

SPOT Gross Profit (TTM) Chart

SPOT gross profit (TTM). Data by YCharts. TTM = trailing 12 months.

A backbone of website building at a discount valuation

An Israeli company, Wix, offers a software platform for individuals and businesses looking to build a web presence. This includes website building and design, help with finding a URL, and e-commerce tools.

With its integrated model, the steady growth of internet usage, and continued product iteration, Wix has grown its paying subscribers substantially over the last decade-plus. In 2010, it only had 100,000 subscribers. At the end of 2021, there were 6 million people and businesses paying for Wix products.

As you might expect, growth in paying subscribers translated into sales. Trailing-12-month revenue hit $1.34 billion last quarter, up almost 10 times from 2014, when the business did $142 million in revenue. Over the next three years, management expects revenue to compound at a 21% to 23% annual rate.

So why are investors so down on the stock? Two reasons: First, revenue growth slowed in the short term due to tough comparisons to the pandemic period. Second, Wix struggled to show it can generate consistent profitability, with free cash flow at negative $51 million over the last 12 months.

Management thinks the first problem will solve itself as the website-building industry laps the pandemic period. The second problem is targeted through better cost management. For example, the company recently announced a $150 million cost-cutting plan and 100 employee layoffs.

It will take a while for these problems to be solved, but by 2025 Wix is guiding for its business to generate $2.5 billion in revenue and $500 million in free cash flow. At a current market cap of $4.8 billion, that would give the stock a forward price-to-free-cash-flow (P/FCF) of 9.6, which is cheap no matter how you slice it. If you believe Wix can hit its free-cash-flow target, the stock looks like an easy buy at these prices.