Successful investing usually involves choosing high-quality companies, buying their shares at a reasonable price, and allowing compound interest to work its magic over many years.
But that’s not the only path to Wall Street success. If you’re willing to take a little extra risk, you can make a fortune by investing in tomorrow’s giant companies today. The best thing is that you can start with these long-term winners before most investors realize their future greatness. This approach can leave you empty-handed, and this strategy is best used as part of a diversified stock portfolio. But if you can find a true winner early on, it could be a game-changer that more than makes up for some disappointments.
With that in mind, let’s check out some stocks that could help you make millions of dollars a little faster in the booming artificial intelligence (AI) market. Everything has to go well and you need to start investing pretty heavily to get into the millionaire club at the last minute. Still, Life360 (NASDAQ: LIF) and Duolingo (NASDAQ: DUOL) are worth another look as they build long-term plans around AI technology.
Life360’s ambitious expansion plans
Life360 may already be a household name. You may have been using the service for years, but the company has been reporting financial results since 2019. The company, which specializes in family and pet location tracking, has been on the American stock market for quite some time. Life360, headquartered in Sydney, Australia, listed its shares on the Nasdaq stock exchange four months ago.
This stock is well below the radar of most investors, who probably don’t think of Life 360 as an AI expert. However, it has nearly 71 million monthly active users (MAUs) in 170 countries, including 2 million paid subscriptions and 10 million location-tracking tile devices. The Life360 smartphone app does the heavy lifting with AI in collision detection and digital safety services.
The company aims to double its number of users and triple its annual revenue from $328 million to $1 billion over the next few years. Currently, earnings before interest, taxes, depreciation, and amortization (EBITDA) are close to breakeven, but management expects EBITDA margins to reach 25% in the long term. Over time, new product and service features should emerge, broadening the company’s market appeal and increasing sales.
Life360 investment case study
So there’s a serious growth story happening here, driven at least in part by Life360’s AI expertise. The company’s annual revenue has nearly tripled from $113 million in calendar year 2021, representing a compound annual growth rate (CAGR) of 53.5%. Still, you can buy the stock at a modest 9.9 times sales.
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This ambitious company currently has a market capitalization of just $3.3 billion. There’s no guarantee that Life360 will reach its ambitious goals right away, but if the company gets close to its stated goals, the stock should soar. If deep user engagement leads to solid long-term growth, your company is headed in the right direction. According to Sensor Tower’s market report, the Life360 app drives market-leading daily user engagement.
Duolingo’s innovative learning platform
One of the few companies that can challenge Life360’s massive daily engagement rates is Duolingo.
The language learning platform, which features a meme-inspired green owl mascot, has 100 million MAUs and 8 million paid members. Under the visionary leadership of CEO and co-founder Luis von Ahn, Duolingo has mastered the art of making repetitive learning fun. By adding gamification features like achievement badges, weekly leagues, and “gems,” memorization routines have become fun games.
Of course, the core feature is the number of daily uses. Approximately 130 Duolingo users have maintained streaks for over 11 years, and my own streak dates back to June 2016.
After all, I can’t speak 11 languages fluently. I approach this app like a language geek, comparing and contrasting different language families and occasionally digging deeper into a particular language.
And that freedom is a key part of Duolingo’s refreshing appeal.
Learn the basics of French or German before traveling to Europe. You can focus on the Japanese tree for years as part of a serious effort to become fluent. You can play it like a game and branch out into math or music courses depending on your mood. These are all valid ways to consume the Duolingo experience, and in each case the company makes money from subscription fees and in-app advertising.
Duolingo’s compelling AI strategy
Of course, the innovator is leaning into the generative AI opportunity. The top-tier Duolingo Max subscription includes AI-generated conversations in common languages, instant AI analysis of mistakes you’ve made in recent lessons, and more. These features currently require a premium subscription, but may be introduced to ad-supported services in the future.
“Currently, many of the AI-based features are in Max. They are at the top tier because it costs money to provide these features,” von Ahn said in the company’s latest earnings call. said. “As the cost of large-scale language models (LLMs) is coming down, we expect the price of some of these AI features to come down. ” or even a free tier. ” (Lightly edited for readability.)
As mentioned earlier, this fun learning platform has attracted many users. The recently reported second quarter MAU count increased 40% year-over-year. Paid subscriptions increased by 52%. Investors are starting to take notice, too, with Duolingo stock up 69% over the past year. But perhaps you’re looking at a future behemoth of online learning with an ultimate reach far beyond the language learning market. The $12.6 billion market cap we see today may look pretty cheap in 10 or 20 years.
Don’t miss out on this potentially lucrative second chance
Have you ever felt like you missed out on buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our team of expert analysts will issue a “Double Down” stock recommendation on a company we think is about to crash. If you’re already worried that you’re missing out on an investment opportunity, now is the best time to buy before it’s too late. And the numbers speak for themselves.
Amazon: If you invested $1,000 when it doubled in 2010, you’d get $21,285!*
Apple: If you invested $1,000 when it doubled in 2008, you’d get $44,456!*
Netflix: If you invested $1,000 when it doubled in 2004, you would have earned $411,959. *
We currently have “double down” alerts on three great companies, and we may not see an opportunity like this again anytime soon.
See 3 “Double Down” stocks »
*Stock Advisor will return as of October 21, 2024
Anders Bylund has a position at Duolingo. The Motley Fool owns a position in and recommends Duolingo and Life360. The Motley Fool has a disclosure policy.
2 Artificial Intelligence (AI) Stocks That Can Make You a Millionaire was originally published by The Motley Fool.
