Editor's Update: This article focused on recent financial data released by CrowdStrike and DigitalOcean. As the author highlights each company's prospects, it is important to consider an even longer term beyond 2025. Based on statistics provided by Markets and Markets and Statista the cloud computing and cybersecurity markets will continue to grow and by 2027 could be valued at $1.2 trillion and over $260 billion, respectively. This long-term potential could explain why Daiwa Securities upgraded CrowdStrike to a buy on Dec. 5.  

Investors learned a difficult lesson over the past year: Stocks can lose a lot of value very quickly. Recession fears in 2022 sent the S&P 500 and the Nasdaq Composite into a bear market, and many individual stocks saw their valuations cut in half or worse. For instance, shares of CrowdStrike Holdings (CRWD -0.68%) and DigitalOcean Holdings (DOCN 0.95%) are down roughly 58% and 76%, respectively, from all-time highs. That leaves both stocks trading near a 52-week low.

Losses like that can be frustrating or even downright terrifying, but long-term investors should step back and look at the big picture. Cybersecurity and cloud computing are large and growing markets, and the future still looks bright for CrowdStrike and DigitalOcean.

Here is why these two growth stocks are worth buying today.

1. CrowdStrike: Cybersecurity

Cybersecurity specialist CrowdStrike is growing at an astonishing pace. Its annual revenue run rate crossed $2 billion in the second quarter, making it the second-fastest software company in history to hit that mark. The company also topped Wall Street's consensus estimates in the third quarter. Revenue climbed 53% to $581 million and non-GAAP (adjusted) earnings soared 135% to $0.40 per diluted share.

However, management said macroeconomic headwinds had elongated sales cycles, which could slow revenue growth in the near term. That commentary sent the stock into a nosedive. But it makes sense for businesses battling inflation and rising interest rates to adopt new products more slowly. CrowdStrike may very well struggle in the next few quarters. But nothing changed about the long-term investment thesis.

CrowdStrike helped reshape the cybersecurity industry over the last decade. It pioneered threat detection based on proactive indicators of attack, rather than relying on reactive indicators of compromise like legacy vendors. Its platform also features an industry-leading artificial intelligence engine that provides "unparalleled prevention of malware and malware-free attacks," according to research company Frost & Sullivan.

Not surprisingly, CrowdStrike is now recognized as a leader in several verticals of the cybersecurity industry, including endpoint security, cloud security, managed detection and response, threat intelligence, and incident response services. Those accolades point to yet another advantage: Its broad platform allows businesses to consolidate security spend with a single vendor, rather than relying on a patchwork of point solutions.

On that note, CrowdStrike estimates its addressable market will reach $97 billion (with its current portfolio) by 2025, but its product roadmap could boost that figure to $158 billion by 2026. Shares currently trade at 14 times sales, a significant discount to the three-year average of 36.3 times sales. That's why this growth stock is worth buying.

2. DigitalOcean: Cloud computing

Cloud computing specialist DigitalOcean is in a similar boat. The company delivered a solid third-quarter report that beat expectations. Revenue climbed 37% to $152 million -- outpacing rivals like Amazon Web Services and Microsoft Azure -- and non-GAAP earnings soared 217% to $0.38 per diluted share. But management's fourth-quarter guidance fell just short of Wall Street's expectations, keeping the stock on a downward trajectory.

Legendary investor Warren Buffett once said, "The stock market is designed to transfer money from the active to the patient," and this situation is a good example. Some investors are so preoccupied with near-term complications that they fail to see the big picture.

DigitalOcean simplifies cloud computing for small and medium-sized businesses (SMBs), an underserved segment of the market currently valued at $72 billion. Tech giants like Amazon and Microsoft undoubtedly offer more cloud services, but their platforms are designed for larger businesses with robust IT support, making adoption difficult for SMBs.

DigitalOcean's platform features an intuitive interface and click-and-go options that provide users with provision, compute, storage, and networking services in minutes, without specialized training. The company also provides 24/7 customer and technical support, along with thousands of developer tutorials. Those resources make it possible for SMBs to quickly build and deploy applications in the cloud.

Looking ahead, management estimates its addressable market will hit $145 billion by 2025, meaning DigitalOcean has a long runway for growth. Better yet, the company already demonstrated its ability to land and expand with customers. Its net retention rate hit an all-time high of 118% in the most recent quarter, meaning the average customer spent 18% more over the past year. That execution should give investors confidence.

Currently, shares trade at 6 times sales, a bargain compared to the average of 12.5 times sales since the company went public in 2021. That creates a reasonable buying opportunity for patient investors.

Related Articles

2 Leading Tech Stocks to Buy in 2022 and Beyond

Tech Sell-Off: 1 Top Nasdaq Stock Down 52% to Buy Before It Starts Soaring