As the second half of 2022 kicks off, investors are hoping for a more steady run in the stock market compared to the last six months. High inflation has wreaked havoc on the economy, and since higher interest rates are the cure, people are feeling the pinch on multiple fronts.
However, there are some early signs of those pressures easing off, with the price of some key commodities rapidly reversing from all-time highs. Still, the technology sector is heavily beaten down at the moment, with the Nasdaq-100 index trading in a bear market after losing more than 27% year to date.
But here are two tech stocks that are bucking the pessimism in a big way, and they're well-positioned to continue to outperform for the rest of the year.
1. Duolingo
Duolingo (DUOL 3.64%) is a global leader in the emerging digital language education industry, and it was among the very few technology stocks showing green in 2022 until an analyst note dropped its positive return into the negative on Monday. Still, its 11% drop year-to-date far outperforms the Nasdaq-100 at this point in the year.
Duolingo has found success by reimagining the education experience, taking a mobile-first approach and gamifying its platform so it feels less like learning and more like entertainment. It introduced a paid subscription option in 2018 for users who want to unlock extra features, and it has quickly rocketed up the rankings to become the highest-grossing education app in Alphabet's Play Store, and the second-highest in Apple's App Store.
Duolingo has amassed 49.2 million monthly active users, of which 2.9 million are now paying a subscription fee. The latter number grew 60% in the first quarter of 2022 compared to the prior-year period, and it is consistently increasing each year as a percentage of active users. It's an indication that users are deriving a great value from the Duolingo platform, and considering that the company continues to add new languages and integrate features powered by advanced tools like artificial intelligence, it's no surprise.
Duolingo estimates it will generate $353 million in revenue during 2022, which would be a 41% jump compared to its 2021 result. The company is targeting an addressable market of 1.8 billion foreign language learners worldwide, and since the app has only been downloaded about 500 million times so far, it still has plenty of runway for growth.
2. Tenable
One key piece of expenditure the corporate world won't compromise on right now, even in difficult economic conditions, is cybersecurity. At least that's the indication from multiple surveys of company leaders over the last 12 months. The threat landscape continues to become more dangerous as organizations shift a greater percentage of their operations online, which makes them vulnerable to attacks from anywhere in the world.
Tenable (TENB 1.34%) leads the cybersecurity industry in vulnerability management and threat detection, and it's experiencing strong growth as companies adopt more advanced tools that can proactively hunt and eliminate risks before they cause costly damage. Tenable's Nessus platform is ranked No. 1 in adoption, serving 30,000 organizations with over 2 million individual downloads, and it also tops the rankings in accuracy and coverage, protecting against more common vulnerabilities and exposures (CVEs) than any of its competitors.
The company grew its annual revenue at a compound rate of 34% between 2016 and 2021, and it could deliver up to $679 million in 2022, according to its guidance. That would mark a slight deceleration in growth to 25%, though as the revenue numbers grow larger, it becomes harder to maintain high rates of increase.
But critically, it's Tenable's largest customers driving much of the company's growth. The number of organizations spending $100,000 per year (or more) with Tenable has ballooned from 124 in 2016 to 1,095 in 2021, a compound annual growth rate of 54%. The increase continued in Q1 2022 as it added 17 more. It highlights the growing focus on cybersecurity in the big end of the corporate sector.
Tenable stock is down 7% in 2022, but it's still crushing the Nasdaq-100. And remarkably, not a single one of the 15 Wall Street analysts who cover Tenable recommend selling it, which speaks to the expectations for future demand for advanced cybersecurity tools.
