The new bull market has many people renewing their interest in investing. With stock prices soaring, you might be worried about buying at the wrong time, but it’s possible to find great businesses in any market environment, especially if you invest with a long-term perspective.
If you’re looking for an attractive business that could be an attractive investment right now, here are two top stocks to consider adding to your portfolio.
1. Duolingo
Duolingo (Nasdaq:DUOL) The company has leveraged the scale of the language learning market by delivering dozens of courses through its extensive platform to millions of users around the world. The company focuses on empowering language learners through personalized lessons and interactive exercises that allow learners to complete their learning anywhere and at their own pace.
Along the way, Duolingo uses artificial intelligence, machine learning, and data analytics to track each individual’s learning journey and fine-tune lessons to ensure they deliver content that’s right for each individual. The company operates on a freemium model: anyone can access Duolingo’s learning content for free, but additional features and perks require a subscription.
Under this model, the company generates revenue from advertising, subscription fees, in-app purchases, and the Duolingo English Test, which is accepted as proof of English proficiency by thousands of higher education programs across the United States, including Yale, Columbia, Duke, and Stanford.
What’s more, learners tend to stick with the app for months or even years, sometimes taking advantage of an extended free trial before becoming a paying user. This flexible model allows Duolingo to reach all types of learners with different budgets and learning goals, and capture a large total addressable market (TAM), which management estimates to be approximately 2 billion people.
Duolingo reported that total bookings increased 41% year over year to $197.5 million in the first quarter, and subscription bookings increased 47% to $161.5 million. The company also ended the quarter with 7.4 million paid subscribers, up 54% year over year. Daily active users also grew 54% to 31.4 million.
Duolingo reported a net income of $27 million on total revenue of $167.6 million. This bottom line was a significant improvement from a loss of $2.6 million a year ago, while revenue grew 45%. Importantly, the company was also cash flow positive, with operating cash flow and free cash flow for the quarter being $83.5 million and $79.6 million, respectively.
In a tough economic environment, advertisers may pull back on spending and users may hesitate to pay subscription fees, but Duolingo’s asset-light freemium model allows the company to tap into a variety of revenue streams.
Duolingo’s shares have risen about 50% over the past year, and investors looking for a top growth stock should consider this leading player in the multi-billion dollar language learning market.
2. Toast
toast (NYSE: TOST) is a cloud-based technology platform for restaurants. The company’s platform offers a wide range of services to help manage all aspects of restaurant operations, from delivery and takeout to payroll and inventory management.
For example, restaurants can use Toast’s point of sale (POS) software to reduce the time needed to take orders and process payments faster. The company’s multi-location management tools allow users to manage menus for multiple restaurants. The company also helps restaurants grow their business by launching loyalty programs and creating email marketing initiatives.
On the hardware side, kitchen display systems allow front-of-house staff to interact with kitchen staff through integrated ordering stations that notify servers when an order is completed and also provide mobile alerts, and we also offer technology such as guest kiosks, handheld POS devices and card readers.
Through this diverse range of services, Toast generates revenue from three main sources: service subscriptions, sales of hardware devices, and financial technology solutions. The majority of the company’s revenue comes from the last category, specifically transaction-based fees from payment processing.
Toast’s revenue for the first quarter was $1.1 billion, up 31% year over year. Total payments processed in the quarter were $34.7 billion, up 30%. While Toast is still operating at a loss, it generated $125 million in free cash flow over the past year.
The company’s stock is up 40% so far this year, but early shareholders are facing big losses. Toast has room to improve on the profitability front, but with its platform serving 112,000 locations, this industry leader is worth buying and holding.
Should I invest $1,000 in Duolingo right now?
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Rachel Warren has no position in any of the stocks mentioned. The Motley Fool owns shares in and recommends Duolingo and Toast. The Motley Fool has a disclosure policy.
The post 2 Growth Stocks to Buy in the 2024 Bull Market was originally published by The Motley Fool.
