To The Moon

$Roku Inc(ROKU)$

2 Unstoppable Growth Stocks You Can Buy With Confidence in a Down Market

These industry leaders are brimming with potential, and the stocks are too cheap to ignore.

The first half of the year has been rough for many investors. High inflation and rising interest rates weighed heavily on the stock market, sending the S&P 500 and the tech-heavy Nasdaq Composite into bear market territory. But there is a silver lining. Plunging stock prices have created bargains across the market, and while no one knows when the downturn will end, historical data suggests sell-offs make great buying opportunities.

Building on that idea, stocks like Roku (ROKU 2.15%) and Zscaler (ZS 3.92%) look ripe for the picking. Here's what you should know.

1. Roku

Shortly after Netflix launched the first streaming service, Roku brought the first streaming player to market. Over a decade later, RokuOS is still the only operating system purpose-built for television, and it has earned a reputation for providing a high-quality viewer experience. That has paved the way for Roku to become the most popular streaming platform in the world.

In the first quarter, Roku powered 31% of global streaming time, nearly double the market share of the nearest rival, and Roku devices captured 47% of programmatic ad spend on connected televisions (CTVs), nearly triple the market share of the nearest rival. Additionally, while Roku saw engagement decelerate -- streaming hours rose just 14% in the first quarter -- it still outpaced the broader industry, which saw streaming time rise by 10% on average. That means Roku is still taking market share.

In the past year, revenue climbed 44% to $2.9 billion, and free cash flow rose 16% to $183 million as Roku delivered another strong financial performance. But shareholders should be particularly excited about the future.

Management is working to drive engagement through international expansion and investing aggressively in The Roku Channel, its own ad-supported streaming service. The Roku Channel is packed with free content: thousands of movies and shows and hundreds of live television channels. That includes several recently added NBC local news channels, which are the first local news options available through The Roku Channel.

Walt Disney and Netflix both plan to introduce ad-supported services in the future, and CTV ad spend is expected to reach $100 billion by 2030, up from $21 billion in 2021, according to BMO Capital Markets. As the most popular streaming platform, Roku is well positioned to capitalize on that opportunity. And with shares trading at four times sales -- a bargain compared to the three-year average of 15.7 times sales -- this growth stock is too cheap to ignore.

2. Zscaler

Ransomware attacks have climbed 80% over the past year as hackers continue targeting all businesses, from manufacturers and retailers to healthcare facilities and financial institutions. But the problem is expected to worsen. Damages inflicted by ransomware attacks will hit $265 billion by 2031, up more than 50-fold from $5 billion in 2017, according to Cybersecurity Ventures. That's where Zscaler can help.

Zscaler specializes in network security, cloud workload protection, and digital experience monitoring. Its platform leans on artificial intelligence (AI) to inspect web traffic, enforce security policies, and block cyberattacks. Better yet, the company operates the largest security cloud in the world, which theoretically makes its AI engine uniquely effective in identifying threats. To that end, research firm Gartner has recognized Zscaler as an industry leader for the past 11 years.

That competitive edge has translated into strong financial results. Revenue soared 61% to $970 million over the past year, and cash from operations climbed 39% to $264 million. But investors have good reason to believe Zscaler will maintain its momentum for years to come. Management puts its market opportunity at $72 billion, and the company should benefit as cybercriminals continue to target businesses across virtually every industry.

Additionally, Zscaler is continuously reinforcing its product portfolio to maintain its leadership. It recently introduced several new features, including AI-powered phishing prevention, AI-powered root cause analysis, and AI-powered security policy recommendations.

Shares currently trade at 22.3 times sales. That may not look cheap, but its average valuation over the past three years is 37.9 times sales. That means investors now have an opportunity to buy this high-quality growth stock at a serious discount.