Several hypergrowth stocks faced significant setbacks in 2022 due to rising interest rates, which compressed their valuations and prompted investors to seek safer investments. However, in the past year, many of these stocks have staged a comeback as interest rates stabilized.
While some investors may hesitate to chase this rally with major indexes nearing all-time highs, I remain bullish on the idea of acquiring shares in leading high-growth companies. In my opinion, three such stocks that warrant attention are Nu Holdings (NYSE: NU), Duolingo (NASDAQ: DUOL), and CrowdStrike (NASDAQ: CRWD).
1. Nu Holdings
Nu Holdings is a digital bank serving customers across Brazil, Mexico, and Colombia. By the end of 2023, its customer base had swelled to 93.9 million, a substantial increase from 54 million just two years prior. Operating solely online without physical branches, Nu leverages Latin America’s growing income levels and internet penetration rates.
The company offers a comprehensive suite of services, including digital checking and savings accounts, credit cards, payment solutions, business loans, investment tools, and insurance services. With an ecosystem that fosters customer loyalty, the average Nu customer utilizes four of its products.
In 2023, Nu witnessed an extraordinary 488% surge in adjusted net income, reaching $1.2 billion. Analysts anticipate further robust growth, with projected adjusted earnings increasing by 64% in 2024 and 61% in 2025. This growth trajectory is fueled by cross-selling initiatives, expansion of its user base, entry into new Latin American markets, and favorable interest rate environments across the region.
Trading at just 27 times forward earnings, Nu presents a compelling investment opportunity given its high growth rates. Moreover, with a large segment of unbanked individuals in Latin America, the company remains well-positioned for continued expansion and penetration into underserved markets.
2. Duolingo
Duolingo is the proprietor of the world’s most downloaded online learning application. Renowned for its extensive offerings encompassing over 40 languages, the platform also features a stand-alone English proficiency assessment and additional apps catering to phonics, mathematics, and music lessons.
Setting itself apart from traditional educational software applications, Duolingo revolutionized the learning experience by infusing gamification elements such as gems and rewards. For its paying subscribers, the company abolished ads and introduced enhanced perks. Moreover, Duolingo anticipates capitalizing on the burgeoning artificial intelligence (AI) market by leveraging generative AI tools to expedite the development of new courses.
Closing 2023 with 88.4 million monthly active users (MAUs), reflecting a robust 46% year-over-year increase, Duolingo reported a revenue surge of 44% to $531 million for the full year. Notably, it achieved a net profit of $16 million, marking a notable improvement from the $60 million net loss recorded in 2022.
Analysts project a further uptick in performance for 2024, with revenue and adjusted earnings expected to climb by 37% and 257%, respectively, driven by continued user acquisition. Looking ahead to 2025, forecasts suggest a 27% revenue increase and an 86% rise in earnings.
Although Duolingo’s stock trades at a premium of 132 times forward earnings, its rapid growth trajectory, expanding profitability, and dominant position in the online education realm may well justify its elevated valuation.
3. CrowdStrike
Many cybersecurity firms traditionally rely on on-site appliances to operate their services, a method laden with drawbacks such as high costs, space constraints, ongoing maintenance needs, and scalability issues. CrowdStrike, however, circumvents these challenges with Falcon, its cloud-native platform that operates without the need for on-site appliances.
This disruptive approach has fueled remarkable growth for the company. In fiscal 2024, ending in January, CrowdStrike reported a 36% increase in revenue to $3.06 billion and anticipates growth between 28% to 31% for fiscal 2025. Analysts forecast a 27% revenue surge for fiscal 2026.
CrowdStrike attributes its robust growth amidst a challenging macro environment to gains in market share, expansion into the government sector, and enhancements in generative AI for its extended detection and response (XDR) platform. Furthermore, the company’s strategy of cross-selling additional services has borne fruit, with 43% of its customers adopting at least six of its cloud-based modules, up from the initial four modules, compared to 39% at the end of fiscal 2023.
Maintaining profitability according to generally accepted accounting principles (GAAP) throughout fiscal 2024, CrowdStrike is expected to see adjusted earnings per share (EPS) climb by 27% in fiscal 2025 and by 25% in fiscal 2026, as projected by analysts.
Though its stock appears relatively expensive at 81 times forward earnings, CrowdStrike remains a premier investment opportunity within the thriving cybersecurity sector.
