Duolingo stock price had a spectacular performance in 2024 as other edtech companies like Udemy and Coursera retreated. It jumped by over 43% after publishing strong financial results during the year. This rally pushed it to a record high of $365 and its market capitalization to over $15 billion.
Duolingo’s business is in high demand
Duolingo is a top American company offering language learning solutions to millions globally. This is a large industry with a big total addressable market as the need to learn new languages continues to rise.
It is also a highly competitive market, with the other notable players in the industry being the likes of Babbel, Rosetta Stone, iTalki, Mondly, Busuu, and Memrise.
Duolingo’s business has grown in the past few years as demand for its solutions has increased. As a result, its annual revenue increased from over $70.8 million in 2019 to over $531 million in the last financial year.
Duolingo’s daily active users has continued rising, moving to over 37.2 million in the third quarter of this year to 24.2 million in the same period last year. Monthly active users jumped to 113.1 million, while paid members surged from 5.8 million to 8.6 million.
The most recent results showed that Duolingo’s revenue rose from $137.6 million in Q3’23 to $192.6 million in Q3’24, representing a 40% YoY growth rate. Its net income jumped from $2.8 million to $23 million, a sign that the company is growing its top-line and bottom-line.
Thanks to its investments in artificial intelligence, the company expects its business to continue doing well. To that end, it launched Video Call, a feature within its most expensive tier that lets people practice speaking skills through Lily, a new teenage character.
Analysts are optimistic in Duolingo’s growth
Analysts are optimistic that Duolingo’s business will continue doing well in the next few years. The average estimate by 19 Wall Street pros is that its revenue will grow by 40% this year and get to $743 million. It will then jump by almost 30% to $961 million.
Duolingo tends to be highly conservative in its guidance, meaning that its business will likely do better than expected. As such, it will likely cross the $1 billion mark in 2025 earlier than what analysts expect.
Duolingo’s business is expected to generate strong profits going forward. The average earnings-per-share (EPS) estimate is that it will make $4.42 this year, followed by $5.75 in the next financial year.
The company has a chance of being more profitable in the future since it is a fairly asset-light business. It has a gross margin of 73%, higher than the sector median of 37%. While it is in the early days of growth, the company’s net income and free cash flow margins have risen to 12.6% and 25%, respectively.
Using the Rule of 40 approach, Duolingo is fairly undervalued. Its revenue growth is over 40%, and its net profit margin is 12%, bringing the total to 52%.
Duolingo stock price analysis
The daily chart shows that the DUOL share price peaked at about $380 in November and then pulled back to the current $325. It has remained above the key support level at $251, its highest level on May 6.
The stock has moved above the 50-day and 100-day moving averages. Also, it has formed a bullish pennant chart pattern, a popular continuation sign. Therefore, while a retest of $250 is possible, the long-term trend is bullish. This DUOL forecast could see it jump to $500 in 2025.
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