2 Under-the-Radar Growth Stocks That Just Got Cheaper Thanks to the Market Sell-Off

The stock market is off to a rough start to 2026. The benchmark S&P 500 index is down almost 9% from its all-time high, and the Nasdaq-100 technology index has officially entered correction territory with a loss of 11%. Ongoing geopolitical tensions in the Middle East have sent oil prices soaring, creating economic uncertainty and clouding the earnings outlook for corporate America.

But historically, investors who bought stock market dips while staying focused on the long term have typically been rewarded, and this time probably won't be different. It might be a good idea to use this opportunity to buy trillion-dollar market leaders like Nvidia at a discount, but many lesser-known stocks could also produce blistering returns in the coming years.

Here's why Lemonade (NYSE: LMND) and Datadog (NASDAQ: DDOG) are two under-the-radar stocks investors might want to scoop up during the recent market sell-off.

Image source: Getty Images.

1. The case for Lemonade

Artificial intelligence (AI) went mainstream in early 2023 with the surging popularity of OpenAI's ChatGPT, but Lemonade started monetizing this revolutionary technology way back in 2015. It's an insurance technology company that is using AI to calculate premiums, streamline its operations, and transform the customer experience. Lemonade currently operates in the car, homeowners, renters, life, and pet insurance markets across the U.S. and Europe.

Lemonade's AI chatbot, Maya, can write insurance quotes for prospective customers in under 90 seconds via the company's website. And when an existing policyholder needs to make a claim, AI Jim can pay them out in just a few seconds with no human intervention.

Lemonade had almost 3 million customers at the end of 2025, which grew at a brisk pace of 23% compared to the prior year. The company's in-force premium (IFP), which is the value of the premiums from all active policies, grew at an even faster pace of 31% in the fourth quarter to reach a record $1.24 billion. IFP growth has actually accelerated for nine straight quarters, highlighting Lemonade's momentum.

The company aims to maintain a gross loss ratio of 75%, which is the proportion of premiums it pays out at claims, but it had fallen to an even better level of 64% at the end of 2025. As a result, the company wound up with a record $738 million in revenue for the year, which grew by 40% compared to 2024.

Lemonade stock is down 20% this year, but it's still up 93% over the last 12 months. It currently trades at a price-to-sales (P/S) ratio of 7.3, which is above its three-year average of 5.1, so it isn't necessarily cheap right now. However, management expects revenue to soar by 61% to $1.19 billion in 2026, placing the stock at a forward P/S ratio of just 3.9.

LMND PS Ratio data by YCharts

In other words, Lemonade stock still has room for upside between now and the end of this year. But the real gains might come over the longer term, because the company aims to grow its IFP nearly tenfold to $10 billion within the next decade.

2. The case for Datadog

Datadog developed a cloud observability platform that instantly alerts businesses to technical issues with their digital infrastructure, so they can be fixed before they cause significant disruptions. This is great for businesses that host online customer portals, or those that rely on online sales channels. But in 2024, Datadog expanded into the AI space with its LLM Observability tool.

Large language models (LLMs) sit at the foundation of AI software applications. LLM Observability helps developers track costs, troubleshoot technical bugs, and monitor output quality, ensuring AI apps function as intended when serving users at scale.

Datadog is also trialing a series of new observability products specifically for AI agents and coding assistants, which will help businesses track costs and maintain output quality when using these transformative tools.

At the end of 2025, around 5,500 of Datadog's 32,700 customers were using at least one of its AI products, which was up 57% compared to the year-ago period. During the fourth quarter, the company's Model Context Protocol (MCP) server, which is the link between Datadog observability data and customer AI applications, saw a staggering 11-fold increase in usage compared to the third quarter just three months earlier. Simply put, adoption of Datadog's AI integrations is skyrocketing.

Datadog generated a record $3.43 billion in revenue during 2025. Growth accelerated to 28% (from 26% in 2024), thanks partly to the company's expanding portfolio of AI products and services. The stock is down 14% this year amid the decline in the broader market. Its P/S ratio is now 12.1, which is near the cheapest level since the company went public in 2019:

DDOG PS Ratio data by YCharts

Therefore, the recent market sell-off might be a great opportunity for investors to buy Datadog stock to hold for the long term.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Datadog, Lemonade, and Nvidia. The Motley Fool has a disclosure policy.