1/3/2024 0 Comments Stock duo![]() The company continued to deliver on its beat-and-raise cadence in its Q3 results, giving us confidence that performance will continue to shine in 2023. If there's one tech stock that has been almost entirely immune to macro headwinds, it's Duolingo. ![]() The bottom line here: there are plenty of reasons to believe that Duolingo is still in the early stages of capturing a rapidly growing, casual online-learning market. ![]() But its underlying ~70% pro forma gross margins give it ample room to scale profitably, like many other software and internet peers. Right now, Duolingo is losing money because it's focused on product development and growth. New subject matter expansions like math should also serve to broaden Duolingo's market potential. The latter, in my view, is a burgeoning market that could eventually see Duolingo turn into a language-accreditation service for languages other than English. On top of its Plus subscriptions, Duolingo makes money from advertising and from administering English proficiency tests. Additional monetization opportunities.With the post-COVID world continuing to normalize and with foreign borders opening up for tourism again, the resurgence in travel will likely also lead to a pickup in demand for Duolingo. One of the top reasons that people learn a language is to travel. Pent-up travel demand is encouraging language learning.The fact that Duolingo has stats to back up the notion that seven units on Duolingo (roughly the entirety of most of the languages in Duolingo's catalog) gives users the same proficiency as five semester-long college courses only serves to highlight the immense value that Duolingo provides in its well-designed app. I use Duolingo myself on a regular basis (and yes, I am among the ~7% of Duolingo's user base who is a Super Duolingo subscriber), and am impressed by the way the company has condensed the difficulty of language learning into bite-sized, gamified lessons. Over the past few quarters, despite its own growing scale, Duolingo has maintained bookings and revenue growth north of 40% y/y, driven both by increased monetization/conversion of free users into paid ones, as well as effective engagement across its marketing channels. In the future, I see Duolingo expanding its brand across a wide number of subjects and potentially creating bundles across its products.įor investors who are newer to Duolingo, here is my full long-term bullish thesis for tech company: ![]() Note as well that Duolingo just released its Duolingo Math product - opening up a brand-new market territory for the company and planting the seeds for its next stage of growth.ĭuolingo Math release (Duolingo Q3 shareholder letter) Though Duolingo doesn't have the "fallen angel" appeal of many other tech stocks at the moment, I can't help but to still champion Duolingo thanks to its fantastic fundamentals and its consistently expanding product base. And despite the fact that this popular language-learning app has now been on the market for years and is a well-known education brand, the company still shows healthy double-digit growth in bookings, revenue, and most importantly subscribers. Most of the sector is battered by declines in online advertising (even titans such as Facebook ( META) have lost more than half of their market value), but Duolingo, down "only" ~15% over the past year, has held on to its value thanks to a revenue base that is built almost entirely on subscriptions. With the market rallying in the early weeks of 2023 and growth stocks getting a facelift after a year of painful declines, long term-oriented investors have a great chance to buy into high-quality names at valuation multiples that have lost the madness of the 2020-2021 era.ĭuolingo ( NASDAQ: DUOL) is a fantastic internet app to look into. ![]()
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