Many growth stocks have fallen sharply over the last year as investors have become increasingly worried about a recession. Even tech titan Amazon (AMZN -1.61%) and pandemic darling Twilio (TWLO -0.07%) have seen their share prices plunge 55% and 89%, respectively, and both stocks currently trade near 52-week lows.

However, some Wall Street analysts think the selling spree has created a buying opportunity. Ivan Feinseth of Tigress Financial Partners has a price target of $192 per share on Amazon, which implies 135% upside from its 52-week low. Meanwhile, Ittai Kidron of Oppenheimer has a price target of $110 per share on Twilio, which implies 147% upside from its 52-week low.

In both cases, those lofty estimates portend triple-digit returns for shareholders in 2023. Is it time to buy these growth stocks?

1. Amazon

Inflation has taken a bite out of Amazon's top and bottom lines over the past year. Consumer demand has softened in response to rising prices, while the rising costs of fuel and electricity have pushed operating expenses higher. As a result, revenue climbed just 10% to $502 billion over the last 12 months, and the company generated negative $26 billion in free cash flow (FCF).

On the bright side, those discouraging results (coupled with near-term economic uncertainty) have created an excellent buying opportunity for patient investors. Amazon stock currently trades at 1.7 times sales, well below the 10-year average of 3.1 times sales. In fact, Amazon stock hasn't traded at a cheaper price-to-sales (P/S) ratio since 2015. That might be reasonable for a business with limited growth prospects, but Amazon has a strong position in three growing markets: e-commerce, cloud computing, and digital advertising.

According to eMarketer, Amazon will account for 38.2% of all e-commerce sales in North America and Western Europe in 2022, and that figure will rise to 38.7% in 2023. That puts the company in a good position, as Statista estimates that online sales in North America will grow at 14% annually to reach $1.9 trillion by 2027, while online sales across Central and Western Europe will grow at 13% annually to reach $860 billion over the same period.

Switching gears, Amazon Web Services (AWS) has tremendous opportunity in cloud computing. In October, research company Gartner recognized AWS as the leader in cloud infrastructure and platform services for the 12th consecutive year, and the cloud computing market is expected to grow at 16% annually to reach $1.6 trillion by 2030.

Additionally, Amazon has also become the fourth-largest digital advertiser in the world, and the company is gaining ground, while market leaders Alphabet and Meta Platforms are losing share. That bodes well for Amazon, as global digital ad spending will increase by 9% annually to hit $1.3 trillion by 2030, according to Precedence Research.

For all of those reasons, this growth stock is indeed worth buying, but only in the context of a long-term investment. The odds of triple-digit returns in 2023 are slim given the challenging economic backdrop. But Amazon could create meaningful wealth for patient shareholders over the next decade.

2. Twilio

Twilio operates a cloud communications platform that lets developers embed features like messaging, voice, and video into their own applications. Twilio also provides a customer data platform (CDP) that helps businesses improve consumer engagement through personalized interactions. Those tools have use cases across customer service, sales, and marketing as they empower clients to build contact centers, send alerts and notifications, and run targeted ad campaigns.

Twilio has a strong market presence in the CDP vertical, and it ranks as the market leader in the communications platform as a service (CPaaS) vertical, according to software research company G2. But Twilio is also struggling from a financial perspective. The company has never generated positive FCF since going public in 2016, and it burned a record $319 million over the last year.

Of course, some of that cash burn can be attributed to the difficult economic environment, but it still raises another concern. Twilio has been highly acquisitive in recent years, and investors have to wonder whether those acquisitions are delivering the desired synergies. Earlier this year, CEO Jeff Lawson spoke confidently about achieving at least 30% annual organic revenue growth (which excludes revenue from companies acquired in the last 12 months) through 2024. But management has since backpedaled, and fourth-quarter guidance now implies 29% organic revenue growth for 2022.

So what? Management badly miscalculated the trajectory of organic revenue, which means Twilio is leaning on recent acquisitions to drive top-line growth, while older acquisitions are fizzling out faster than expected. In other words, the anticipated synergies that drove Twilio to make those acquisitions may not be materializing, and that could put even more pressure on profitability down the road.

On the bright side, Twilio benefits from a strong competitive position in an $80 billion market, and management believes the company will achieve non-GAAP operating profitability in 2023 and beyond. However, I think investors should avoid buying this stock until Twilio has definitively proven that it can generate positive FCF. That does not mean it's time to sell. But as a shareholder myself, I will be monitoring Twilio's financial results very closely in the coming quarters.