Many hypergrowth stocks were crushed in 2022 as rising rates compressed their valuations and drove investors toward more conservative investments. But over the past year, many of those stocks bounced back as interest rates stabilized.
Investors might be wary of chasing that rally as the major indexes hover near their all-time highs. However, I think it's still a good idea to pick up some shares of high-growth companies that lead their respective markets. I believe these three popular stocks fit the bill: Nu Holdings (NU -0.68%), Duolingo (DUOL 1.11%), and CrowdStrike (CRWD -0.07%).
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1. Nu Holdings
Nu Holdings is a digital bank that serves customers in Brazil, Mexico, and Colombia. It served 93.9 million customers at the end of 2023, compared to 54 million customers just two years ago. It's an online-only bank that doesn't operate any physical branches -- which makes it a great play on Latin America's rising income levels and internet penetration rates.
In addition to digital checking and savings accounts, Nu provides credit cards, payment services, business loans, investment tools, and insurance services. That ecosystem is sticky: Its average customer uses four of those products.
In 2023, Nu's adjusted net income surged 488% to $1.2 billion. Analysts expect its adjusted earnings to grow another 64% in 2024 and 61% in 2025 as it cross-sells more services, expands its user base, enters more Latin American markets, and profits from historically high interest rates across the region.
Those are high growth rates for a stock that trades at just 27 times forward earnings -- and Nu could still have plenty of room to run as more unbanked individuals across Latin America sign up for its services.
2. Duolingo
Duolingo owns the world's most downloaded online learning app. It's best known for its online courses for more than 40 languages, but it also provides a stand-alone English proficiency test and other apps for phonics, math, and music lessons.
It disrupted traditional education software applications over the past few years by gamifying the experience with gems and rewards. For its paid users, It eliminated ads and rolled out more perks. It also expects to profit from the expansion of the artificial intelligence (AI) market as it uses generative AI tools to accelerate its development of new courses.
Duolingo served 88.4 million monthly active users (MAUs) at the end of 2023, representing a 46% increase from a year earlier. Its revenue rose 44% to $531 million for the full year, and its net profit of $16 million marked a significant improvement from its net loss of $60 million in 2022.
For 2024, analysts expect its revenue and adjusted earnings to rise 37% and 257%, respectively, as it continues to gain new users. For 2025, they expect its revenue and earnings to grow 27% and 86%, respectively.
Duolingo's stock isn't cheap at 132 times forward earnings, but its rapid growth, rising profits, and dominance of the online education market could all justify that higher valuation.
3. CrowdStrike
Many cybersecurity companies install on-site appliances to run their services, but that approach is expensive, takes up a lot of space, requires constant on-site maintenance, and can be difficult to scale as an organization expands. CrowdStrike addresses those issues with Falcon, its cloud-native platform that doesn't require any on-site appliances.
That disruptive approach has enabled it to grow like a weed. Its revenue rose 36% to $3.06 billion in fiscal 2024 (which ended this January), and it expects 28% to 31% growth in fiscal 2025. Analysts expect 27% revenue growth in fiscal 2026.
It attributes its healthy growth in a tough macro environment to its market share gains, its expansion in the government sector, and generative AI upgrades for its extended detection and response (XDR) platform. It's also been cross-selling more services: 43% of its customers had adopted at least six of its cloud-based modules (up from its starting set of four modules) -- compared to 39% of its customers at the end of fiscal 2023.
CrowdStrike has also stayed profitable on a generally accepted accounting principles (GAAP) basis in each quarter of fiscal 2024. Analysts expect its adjusted earnings per share (EPS) to rise 27% in fiscal 2025 and 25% in fiscal 2026. Its stock might look a bit pricey at 81 times forward earnings, but it's still a best-in-breed play on the booming cybersecurity market.
