Published first at www.3minutebreakdowns.com
Duolingo stock analysis. Ticker: DUOL
Duolingo reported earnings last week and the stock jumped by over 20%. However, shares have pulled back since then to just under 214 dollars. At the current share price, Duolingo has a market cap of 10.5 billion with 748 million of cash on its balance sheet and no debt.
Revenue over the last 12 months comes to 531 million, with 16 million of net income and 140 million of free cash flow. So Duolingo stock looks expensive at over 18 times revenue and over 100 times adjusted ebitda. Indeed, the idea that a language learning app, centered around a cartoon owl, can be worth 10 billion dollars strikes many investors as evidence of a bubble.
But if you take a closer look, Duolingo is a hugely impressive business. Total revenues last year increased by 44%. Monthly active users increased 46% to 88 million and paid subscribers grew 57%. Adjusted EBITDA margin swung 13 percentage points in 2023 to just under 18%. So you can see how quickly Duolingo can move from roughly break even to significant profits.
And the company also gave a strong outlook. Revenue is expected to grow another 36% next year and over time, Duolingo thinks it can get to an ebitda margin between 30 and 35%.
The company has only recently rolled out new products for maths and music which can offer new avenues for growth. There’s really no reason why Duolingo’s structure can’t accommodate lessons in multiple categories for users around the world.
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