1 AI-powered growth share I just had to buy for my Stocks and Shares ISA!

Our writer reveals an exciting new company in his Stocks and Shares ISA portfolio that he thinks is poised for years of AI-fuelled growth.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.


Every evening, I’m reminded by a big green owl to do my daily Spanish lesson. The guilt-trip works, as I’m soon clicking on the Duolingo (NASDAQ: DUOL) app to practice. The lessons are engaging and I think the firm is on to something powerful. So much so, I recently opened a small starter position in my Stocks and Shares ISA.

¡Hola, Duolingo!

The app was launched in 2012 with the aim of democratising language learning, making it available to anyone, anywhere. The founders are both computer scientists with backgrounds in AI.

Today, the company offers 40+ languages to more than 113m monthly active users worldwide. It operates an ad-supported freemium model, with paid subscription options.

Should you invest £1,000 in Vistry right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Vistry made the list?

See the 6 stocks

Duolingo’s secret sauce is its ability to keep students motivated, which I can attest to with my own 124-day streak! It does this through gamified reward systems and playful cartoon characters, transforming grammar lessons (yawn) into something fun.

But this isn’t a trivial app for children. Powering the platform is artificial intelligence (AI) that personalises the learning experience to deliver superior outcomes and improved user engagement.

For example, the firm uses machine learning models to adapt lessons according to a user’s strengths and weaknesses. It can then tweak difficulty levels based on this data.

40% growth…¡increíble!

Growth is very strong. In Q3, revenue surged 40% year on year to $193m. Paid subscribers hit 8.6m, up 47%, while daily active users (DAUs) grew 54% to 37.2m. 

Duolingo is investing for growth, so isn’t yet optimised for maximum profits. Yet it still achieved net profit of $23.4m and free cash flow of $52.7m in the quarter. This suggests the digital platform could be enormously profitable as it matures, assuming growth doesn’t stall or something better comes along, which are risks for any high-growth company.

Co-founder and CEO Luis von Ahn commented: “We performed superbly across all of our key operating metrics this quarter, with DAU and bookings growth exceeding our expectations.”

The reason I’ve only taken a small starter position here is due to the high valuation. After doubling in just six months, the stock is trading at a price-to-sales multiple of 21, based on 2024’s forecast revenue. That doesn’t present much wiggle room if, again, growth unexpectedly slows in 2025.

Created with Highcharts 11.4.3Duolingo PriceZoom1M3M6MYTD1Y5Y10YALL28 Jul 202131 Jan 2025Zoom ▾Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '2520222022202320232024202420252…20252…www.fool.co.uk

AI-powered

However, I’m backing the company to continue expanding, boosted by a new higher subscription tier (Duolingo Max) that it’s rolling out.

This has powerful AI features, including one that enables learners to have spontaneous video-call conversations with Lily, a sassy, purple-haired goth avatar with a signature deadpan demeanour. She even popped up on the Q3 earnings call!

My young daughter, who also loves Duolingo, likes to mimic Lily, sarcastically rolling her eyes and clapping slowly in mock enthusiasm to various things. 

Massive market opportunity

There are an estimated 2bn people around the world actively learning a foreign language. Duolingo, which is quickly becoming synonymous with language learning in popular culture, only had 8.6m paid subscribers in Q3. So the growth opportunity appears vast.

Duolingo also offers maths and music courses, with a long-term goal to teach various subjects. Indeed, it aims to rival — or even surpass — human tutors.

Of course, it might never achieve that ambition. But if it does one day, the business will be worth a hell of a lot more than $16bn.

Should you buy Vistry now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ben McPoland has positions in Duolingo. The Motley Fool UK has recommended Duolingo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Dividend Shares

Why this stock market correction is great for passive income investors

Jon Smith explains why those looking for passive income from dividends could benefit from the move lower in stock prices…

Read more »

Investing Articles

The FTSE’s tanking. Here’s what I’m doing

In the blink of an eye, the FTSE has fallen more than 10% due to economic uncertainty. Here’s how Edward…

Read more »

US Stock

Apple stock is close to 52-week lows. Should I snap it up now?

Jon Smith discusses the double-digit percentage fall in Apple stock last week and weighs up whether now's the time to…

Read more »

Investing For Beginners

2 FTSE 100 gems that rallied last week as the stock market tumbled

Jon Smith flags up a couple of FTSE 100 shares that actually jumped at a time when most of the…

Read more »

Investing Articles

Glencore’s share price is 53% off its 52-week highs. Is it time to consider buying?

Glencore’s share price has tanked due to concerns over an economic slowdown. Is this an amazing buying opportunity for long-term…

Read more »

Investing Articles

Forecast: in 1 year, the Marks and Spencer share price could be…

The Marks and Spencer share price has hit its highest point since 2016 after more than doubling under the new…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Down 34%, does IAG’s share price look an unmissable bargain to me now?

IAG’s share price had fallen a long way even before the latest market rout, but this may mean a bargain-basement…

Read more »

Investing Articles

Forecast: in 1 year, the HSBC share price could be…

The HSBC share price is approaching a 20-year high under its new CEO as he targets $1.5bn of savings. Here…

Read more »