The new bull market has given many people a renewed interest in investing. While rapidly rising stock prices may make you nervous about buying at the wrong time, you can find great companies in any market environment, especially if you invest with a long-term mindset.
Are you looking for interesting companies that seem like attractive investments at the moment? Then here are two top stocks to consider for your portfolio.
1. Duolingo
Duolingo (NASDAQ: DUOL) has capitalized on the size of the language learning market by offering dozens of courses through a comprehensive platform to millions of users around the world. The company focuses on helping language students with personalized lessons and interactive exercises, which they can complete anywhere and at their own pace.
In that process, Duolingo uses artificial intelligence, machine learning and data analytics to track each individual’s learning journey and tailor lessons to ensure they get the content that’s right for them. The company operates on a freemium model, meaning anyone can access the learning content on Duolingo for free, but additional features and benefits require a subscription.
Based on this model, the company generates revenue from advertising, subscription fees and in-app purchases. It also makes money from the Duolingo English test, which has been adopted by thousands of higher education programs across the country, including Yale, Columbia, Duke and Stanford, as proof of English proficiency.
Additionally, students often stay with the app for months or even years. They can use the free experience for a long time before becoming paying users. This flexible model allows Duolingo to reach all types of learners with different budgets and learning goals for a significant total addressable market (TAM). Management estimates the TAM to be close to 2 billion people.
In the first quarter, Duolingo reported total bookings of $197.5 million, up 41% year over year, while subscription bookings rose 47% to $161.5 million. It also had 7.4 million paying subscribers at the end of the quarter, up 54% year over year. The total number of daily active users also increased by 54% to 31.4 million.
Duolingo reported net income of $27.0 million on total revenue of $167.6 million. That operating profit was a notable improvement from a loss of $2.6 million a year ago, while revenue grew 45%. Importantly, the company is also cash flow positive, with operating cash flow and free cash flow for the quarter coming in at $83.5 million and $79.6 million, respectively.
While advertisers may scale back spending and users may hesitate to pay for subscriptions in tough economic conditions, Duolingo’s asset-light, freemium model allows it to tap into a range of revenue streams.
Duolingo shares are up about 50% in the past year. For investors looking for a top growth stock, consider this dominant player in the multibillion-dollar language education market.
2. Toast
Toast (NYSE: TOST) is a cloud-based technology platform for restaurants. The platform offers a wide range of services to help restaurants manage every aspect of their operations, from delivery and takeout to payroll and inventory.
For example, restaurants can use Toast’s point-of-sale (POS) software to reduce the time it takes to take an order and process payments quickly. Its multi-location management tool lets users manage menus across multiple restaurants. The company even helps restaurants grow their business by launching loyalty programs and developing email marketing initiatives.
On the hardware side, the Kitchen Display System allows front-of-house staff to communicate with kitchen staff through integrated ordering stations, which notify servers when orders are ready and provide mobile alerts. It also offers technology such as guest kiosks, portable POS devices, and card readers.
With this wide variety of offerings, Toast generates revenue from three primary sources: service subscriptions, hardware device sales, and financial technology solutions. The lion’s share of revenue comes from the latter category, specifically transaction-based payment processing fees.
In the first quarter, Toast’s revenue rose 31% year over year to $1.1 billion. The company processed $34.7 billion in gross payment volume for the quarter, up 30%. Toast is still operating at a loss, but it did generate $125 million in free cash flow over the past year.
Early investors are staring at steep losses, even as the stock has risen 40% so far this year. Toast has work to do, but with a platform serving 112,000 locations, this market leader is worthy of a buy-and-hold position.
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Rachel Warren has no positions in any of the stocks mentioned. The Motley Fool holds and recommends positions in Duolingo and Toast. The Motley Fool has a disclosure policy.
2 Growth Stocks That Scream Like Bargains in the 2024 Bull Market was originally published by The Motley Fool
