Supermicro, CrowdStrike, and Duolingo are still evolving and expanding.
Many growth stocks lost their luster over the past two years as inflation, rising interest rates, and other macro headwinds drove investors toward safer investments. But with interest rates set to decline by the end of the year, it might be a good time to shop around for high-growth stocks that could head even higher over the next decade.
For that longer time frame, I think it’s a good idea to buy a few “best in breed” stocks across the booming artificial intelligence (AI), cybersecurity, and online learning markets. I believe Super Micro Computer (SMCI -3.05%), CrowdStrike (CRWD 0.69%), and Duolingo (DUOL 0.62%) are solid plays on those evolving sectors.
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The AI stock: Super Micro Computer
Super Micro Computer, also known as Supermicro, produces high-performance liquid-cooled servers for data centers. That focus made it an ideal partner for Nvidia, which grants it access to its top-tier data center GPUs before many other server makers. That consistent support enabled Supermicro to carve out a niche in dedicated AI servers — and its sales have soared as the AI market expanded.
That’s why Supermicro’s revenue and earnings grew 37% and 115%, respectively, in fiscal 2023 (ended last June). Analysts expect revenue and earnings to grow another 110% and 102%, respectively, in fiscal 2024. Those are explosive growth rates for a stock that trades at just 24 times forward earnings.
Supermicro’s growth will likely cool off as the market’s supply of AI servers catches up to its feverish demand, but it still has room to run. It already generates more than half of its revenue from its dedicated AI servers, and Bank of America expects its global share of AI servers to rise from 10% to 17% over the next three years as the market expands about 150%.
The cybersecurity stock: CrowdStrike
Many older cybersecurity companies install on-site appliances, which are expensive, take up a lot of space, and require constant maintenance. CrowdStrike addresses those issues with Falcon, a cloud-native endpoint network security platform that doesn’t require any appliances at all. That approach is cheaper, easier to scale as an organization expands, and locks in its clients with sticky recurring subscriptions.
CrowdStrike’s early-mover advantage in this space has enabled it to grow like a weed. Like many of its industry peers, it struggled to land bigger contracts in a tougher macro environment over the past year — but its revenue and adjusted earnings per share (EPS) still grew 36% and 101%, respectively, in fiscal 2024 (ended this January). For fiscal 2025, it expects revenue to grow 30%-31% as adjusted EPS rises 27%-30%.
CrowdStrike attributes those robust growth rates to its market share gains, new government contracts, and the rollout of new generative AI tools across its ecosystem. Its stock certainly isn’t a bargain at 95 times forward earnings, but it should remain one of the market’s fastest-growing cybersecurity companies for the foreseeable future.
The online learning stock: Duolingo
Duolingo owns the world’s largest online learning app. It provides online courses for more than 40 languages, a stand-alone English proficiency test, and newer apps for learning phonics, math, and music. It simplifies and gamifies the learning experience with gems and rewards, and its paid users get an ad-free experience with additional perks.
Between the fourth quarters of 2020 and 2023, Duolingo’s total number of monthly active users (MAUs) more than doubled, its daily active users (DAUs) more than tripled, and its number of paid subscribers more than quadrupled. It ended the first quarter of 2024 with 97.6 million MAUs, 31.4 million DAUs, and 7.4 million paid subscribers.
Unlike many other online education companies, Duolingo isn’t too worried about the disruptive potential of generative AI platforms. Instead, it’s been using generative AI tools to craft new online courses, replace some of its contractors, and even launch new chatbot-powered language lessons.
In 2023, revenue rose 44% and it finally turned profitable. For 2024, analysts expect revenue and earnings to grow 38% and 357%, respectively. The stock might seem a bit pricey at 122 times forward earnings, but it could maintain those premium valuations as it continues to lock in new users and expand its ecosystem with new courses and tools.
Bank of America is an advertising partner of The Ascent, a Motley Fool company. Leo Sun has positions in CrowdStrike. The Motley Fool has positions in and recommends Bank of America, CrowdStrike, Duolingo, and Nvidia. The Motley Fool has a disclosure policy.