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2 growth stocks that scream buy recommendations in the 2024 bull market

The new bull market has renewed interest in investing for many people. Although rapidly rising stock prices may make you worry about getting in at the wrong time, you can find great companies in any market environment, especially if you invest with a long-term mindset.

If you are looking for attractive companies that currently represent an attractive investment, consider the following two top stocks for your portfolio.

1. Duolingo

Duolingo (NASDAQ:DUOL) has capitalized on the size of the language learning market by offering dozens of courses to millions of users around the world through a comprehensive platform. The company focuses on helping language learners with personalized lessons and interactive exercises that they can complete anywhere and at their own pace.

Duolingo uses artificial intelligence, machine learning, and data analytics to track each individual’s learning history and tailor lessons to ensure they receive the content that’s right for them. The company operates on a freemium model, meaning anyone can access Duolingo’s learning content for free, but additional features and perks require a subscription.

Based on this model, the company generates revenue from advertising, subscription fees and in-app purchases. It also makes money from its English test, Duolingo, which is used as proof of English proficiency by thousands of college programs across the country, including Yale, Columbia, Duke and Stanford.

In addition, learners tend to stay loyal to the app for months or even years. They may use the free version 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 market (TAM). Management estimates its TAM to be around 2 billion people.

In the first quarter, Duolingo recorded bookings of $197.5 million, up 41% year over year, while subscription bookings increased 47% to $161.5 million. Additionally, Duolingo had 7.4 million paying subscribers at the end of the quarter, up 54% year over year. Total daily active users also increased 54% to 31.4 million.

Duolingo reported net income of $27.0 million on total revenue of $167.6 million. This net income was a significant improvement from the loss of $2.6 million a year ago, while revenue increased 45%. Also important, the company is cash flow positive: operating cash flow and free cash flow for the quarter were $83.5 million and $79.6 million, respectively.

While advertisers may cut back on spending and users may be more hesitant to pay for subscriptions during tough economic times, Duolingo can tap into a number of revenue streams with its asset-light freemium model.

Duolingo stock has gained about 50% over the past year. For investors looking for a top growth stock, this dominant player in the multi-billion dollar language learning market is worth considering.

2. Toast

toast (NYSE:TOST) is a cloud-based technology platform for restaurants. The platform offers a wide range of services that help restaurants manage every aspect of their operations, from delivery and pickup 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 allows users to manage the menus of multiple restaurants. The company even helps restaurants grow their business by implementing loyalty programs and developing email marketing initiatives.

On the hardware side, the Kitchen Display System allows wait staff to interact with kitchen staff through integrated ordering stations that notify wait staff when orders are ready and provide mobile notifications. It also offers technologies such as guest kiosks, portable POS devices and card readers.

With this wide range of offerings, Toast generates revenue from three main sources: service subscriptions, sales of hardware devices, and financial technology solutions. The lion’s share of its revenue comes from the last category, particularly transaction-based fees from payment processing.

In the first quarter, Toast’s revenue increased 31% year over year to $1.1 billion. The company processed $34.7 billion in gross payment volume during the quarter, up 30%. Toast is still operating at a loss, but generated $125 million in free cash flow last year.

Early shareholders are looking at big losses, even though the stock is up 40% year-to-date. Toast still has work to do to improve its bottom line, but with its platform serving 112,000 locations, this industry leader is worth a buy-and-hold position.

Should you invest $1,000 in Duolingo now?

Before you buy Duolingo stock, consider the following:

The Motley Fool Stock Advisor The analyst team has just published what they believe to be The 10 best stocks for investors to buy now… and Duolingo wasn’t one of them. The 10 stocks that made the cut could deliver huge returns in the years to come.

Consider when NVIDIA created this list on April 15, 2005… if you had invested $1,000 at the time of our recommendation, You would have $757,001!*

Stock Advisor offers investors an easy-to-understand plan for success, including instructions on how to build a portfolio, regular updates from analysts, and two new stock recommendations per month. The Stock Advisor Service has more than quadrupled the return of the S&P 500 since 2002*.

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*Stock Advisor returns as of June 24, 2024

Rachel Warren does not own any stocks mentioned. The Motley Fool owns and recommends Duolingo and Toast. The Motley Fool has a disclosure policy.

2 Growth Stocks to Buy in the 2024 Bull Market was originally published by The Motley Fool

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