DUOL - Duolingo The Language Learning Market Leader Is Worth Buying
2024-06-29 13:20:15 ET
Summary
- Duolingo's Learning and Investment Flywheels give it huge competitive advantages.
- DUOL's market leadership in language learning will continue to propel its growth.
- The company's business model of gamifying education and leveraging social media are unique.
- Duolingo has very strong operational leverage, throwing up gobs of cash.
- Duolingo's adjusted earnings are growing at a very rapid rate making it attractive even at this rate.
I'd been eyeing language learning app, Duolingo (DUOL) for a while, and finally bit the bullet and bought the stock around $190. I think it was a great opportunity and even though it has since climbed to $205, there is still room for the stock to double in the next 3-4 years on steady revenue growth of 30% and adjusted earnings growth of 98% as operating margins improve and turn the business into an earnings story as well. For now, it generated a strong operating cash flow of $153Mn in 2023 with a margin of 29%, and adjusted EBITDA of $94Mn with a margin of 18%, reaffirming my conviction that the business is strong to generate enough profits down the road as revenue growth slows from the hyper growth of over 50% in the past 4 to a healthy 30% in the next 4.
I will continue to accumulate between $190-210 and hold for the next 3-5 years.
Q1-24 results and guidance confirm progress
For Q1-2024, the fantastic performance continued as Duolingo grew revenues by a whopping 45% YoY and beat revenue estimates by a slight $2Mn, and adjusted EBITDA a massive 191%. It beat non-GAAP EPS by 30 points, clearly demonstrating that operating leverage is flowing through to the bottom line....
Duolingo, The Language Learning Market Leader Is Worth Buying