The economy of 2022 was largely defined by rising inflation and dropping stock prices. Looking forward to 2023, nobody can predict how the stock market will perform, but you can always overprepare to avoid being underprepared.

Even if a bear market continues in the near future, you can be confident the market will eventually see brighter days. And when it does, these three beaten-down growth stocks stand to gain a lot from it.

1. SentinelOne

SentinelOne (S -0.96%) is a cybersecurity company that uses artificial intelligence (AI) to automate the cyberattack detection process. Unlike many other cybersecurity companies, SentinelOne uses a hybrid model that allows customers to manage their service via the cloud or on-premises virtual appliances. This shortens the infection-detection-response time, and its effectiveness has attracted many global household names to SentinelOne.

The company continues to attract higher-spending businesses, growing its customers with annual recurring revenue (ARR) of more than $100,000 by 99% year over year. Its dollar-based net retention is also 134%, meaning customers are spending 34% more with the company each year. When you consider the long-term value customers bring to the business, it makes sense why the company is prioritizing customer acquisition and is OK with not being profitable for the next couple of years.

When money is tight and companies need to cut costs, cybersecurity will be one of the last items on the list to cut. The cost of cybercrime is not only expensive financially, but the reputational damage it can do to a company can be hard to bounce back from.

Despite its falling stock price, SentinelOne's earnings have been increasing at an impressive pace and much faster than some of its competitors. This should be intriguing for long-term investors willing to wait out the current down period.

S Revenue (Quarterly) Chart

DATA BY YCharts

2. Block

Block (SQ -0.28%) -- formerly named after its flagship company, Square -- saw its stock price increase over 350% from March 2020 to August 2021. It has since lost over three-fourths of its value. Stock price aside, the company has managed to put up impressive financials, bringing in $1.57 billion in profit in its Q3 (up 38% from a year ago).

Block's Square business, which provides hardware and payment processing for businesses, has been its bread and butter from the beginning, but its future growth may rely on the success of its Cash App business. Cash App is a personal finance app that lets users transfer money, buy stocks and Bitcoin, get a debit card linked to the app, and even file taxes. Square accounted for most of Block's profit ($783 million), but Cash App's profit ($774 million) grew faster YOY: 51% compared to 29%.

Square is a lot more susceptible to economic conditions, since it relies a lot on transaction fees and customer spending fluctuates, but Cash App's expanding ecosystem helps shield it from that. Cash App's peer-to-peer payments draw consumers in, but its banking services will help the company keep customers for much longer. It's one thing to use an app to send and receive money, but it's a different ballgame when you have an account and routing number and access to services like direct deposit, investing, and tax filing.

3. Spotify

Aside from the market-wide downturn, Spotify (SPOT 2.86%) has seen its stock price fall because of concerns over its low margins. Investors rightfully have concerns over this, but some of the company's other metrics should be encouraging. Its 456 million monthly active users (MAUs) are up 20% from a year ago, premium service users are up 13%, and revenue increased 21%.

Spotify reported a $228 million operating loss in its Q3, but it also spent $386 million on research and development, cutting into short-term profits. These investments are largely going into Spotify's growing podcasts and audiobooks segments, which is a good long-term move for the company, considering how much better those profit margins are than music streaming.

SPOT Chart

DATA BY YCharts

When economic conditions aren't good, investors tend to gravitate toward more stable, profitable companies, so it makes sense why there may be bearish sentiments surrounding Spotify right now. However, at current price levels, it may be a good time to start a stake in the music streaming giant. There's no reason to believe Spotify's growth will slow down noticeably anytime soon.