Growth stocks are having a terrible year amid the broader market sell-off caused by the Federal Reserve's hawkish nature. This led to a sharp increase in interest rates thanks to recent inflation reports.

The Fed hiked interest rates five times so far this year. September's report of an 8.2% increase in consumer prices over the prior-year period suggests the central bank will continue to raise rates to cool surging inflation. That's bad news for high-growth companies such as Advanced Micro Devices (AMD -3.77%) and Twilio (TWLO -2.02%), which were sold off brutally despite reporting outstanding growth in recent quarters.

However, Wall Street seems optimistic that these two growth stocks could soar big time in the coming year. Let's see why that may be the case.

Advanced Micro Devices stock could jump nearly 240%

AMD stock is down 60% in 2022 and is trading close to the lower end of its 52-week range. Analysts, however, have a median price target of $92 on the stock that points toward a 58% upside from current levels. What's more, AMD carries a Street high price target of $200, which would translate into a terrific upside of almost 240% from current levels.

That's not surprising, as analysts are still hopeful for a solid performance from AMD despite concerns about slowing semiconductor sales and the company's recent guidance that it has been hit hard by the PC market's downturn. AMD's preliminary Q3 results indicate that its revenue will increase at a slower pace of 29% over the prior-year period to $5.6 billion. It was earlier anticipating 55% year-over-year revenue growth to $6.7 billion, but weak sales of processors for notebooks and desktops derailed its momentum.

Still, there is a lot to like about AMD. The company has gained share in the lucrative client and server processor markets where it is still a smaller player as compared to Intel. AMD controlled 20.6% of the desktop processor market in the second quarter, with Intel commanding the rest. AMD's notebook market share stood at nearly 25%, while it controlled 13.9% of the server processor market.

Now, AMD is expected to keep gaining market share against Intel for the next three years, according to Wedbush Securities. Intel itself expects to lose ground in the data center market to AMD. Market share gains in the processor market could add billions of dollars to AMD's revenue in the long run, along with other growth drivers such as the gaming console space.

Not surprisingly, AMD's bottom-line growth is expected to accelerate as the chart below indicates.

AMD EPS Estimates for Current Fiscal Year Chart

AMD EPS Estimates for Current Fiscal Year data by YCharts

The company's 2024 earnings estimate of $5.05 per share could translate into a stock price of $197 at AMD's five-year average forward price-to-earnings (P/E) ratio of 39. Given that AMD has enough catalysts in the bag to boost earnings impressively in the next couple of years, it could continue to command a rich multiple.

That's why investors looking to buy a beaten-down semiconductor stock may want to take a closer look at AMD. Its trailing P/E ratio of 25 is well below its five-year average earnings multiple of 100.

Twilio is another stock that seems set to soar

The adoption of cloud communications services has ensured impressive growth at Twilio, which is the leading player in this fast-growing space. The company's revenue in the second quarter was up 41% year over year to $943 million. More importantly, Twilio's dollar-based net expansion rate stood at 123% in Q2, suggesting that existing customers increased their spending on the company's offerings.

It is worth noting that Twilio's dollar-based net expansion rate has consistently remained above 100% in the past couple of years. Customers either increased their use of the company's offerings or adopted more of its solutions, as the consistent strength in the metric indicates. The good part is that Twilio is in a solid position to sustain such growth, especially considering that it is growing faster than its market and commands a dominant share of space.

Last year, the global communications platform-as-a-service (CPaaS) market that Twilio operates in was worth $6 billion. Twilio alone generated $2.84 billion in revenue last year, which shows the company's dominance. The CPaaS market is anticipated to clock annual growth of nearly 31% through 2027, generating an annual revenue of over $30 billion at the end of the forecast period.

Twilio's top line is expected to increase 36% in 2022 to almost $3.9 billion, indicating that it could gain more share. The secular growth of the cloud communications market and Twilio's share make it clear that its solid revenue growth is sustainable.

TWLO Revenue Estimates for Current Fiscal Year Chart

TWLO Revenue Estimates for Current Fiscal Year data by YCharts

The stock is currently trading at 3.6 times sales, which represents a huge discount to its five-year average sales multiple of 16.7. Multiplying the 2024 revenue forecast with Twilio's current price-to-sales ratio would translate into a market cap of $22 billion, representing a 76% upside over the current market cap of $12.5 billion.

But it won't be surprising to see Twilio command a higher sales multiple thanks to its fast-growing nature. Assuming Twilio trades at half of its five-year average P/S ratio after two years, its market cap could grow to $50 billion. That means the stock could more than triple its current market cap. Wall Street has also painted impressive price targets on Twilio.

The median price target of $125 points toward an 83% upside from current levels, while the Street high target of $210 would translate into gains of nearly 210%. So, Twilio looks like an enticing cloud stock to buy right now following its severe drop as it could deliver monster gains in the long run.