Duolingo stock analysis. DUOL stock.
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I think it’s worth taking a look at Duolingo because its one of the best performing stocks this year, gaining over 90%.
The company helps people learn languages through its app and its got a successful marketing strategy via social media channels like Instagram and TikTok where it has over 6 million followers.
Based on the current share price, the company has a market cap of 5.6 billion dollars. With 600 million of cash and no debt the enterprise value is roughly 5 billion.
Revenue sits at 370 million over the last 12 months but the company is not yet profitable reporting minus 60 million in net income. Free cash flow is positive at 48 million and stock based compensation is also significant at 20% of sales.
However, the story with Duolingo is rapid revenue growth. Revenues have grown from just 71 million in 2019 to 370 million today, an increase of 5x.
Gross margins are good too, increasing from 71% in 2019 to 73% today.
Duolingo can also be proud of the positive impact it’s having. The app has over 500 million users, 37 million of which pay to improve their language skills. Compare that to Pinterest which has a similar audience and is valued at 18 billion.
Key to the success of Duolingo is it’s gamified approach to learning. And there’s no doubt the company can expand its offering to incorporate more subjects such as mathematics, physics and more.
#stocks #investing #stockstobuy #finance #overlookedalpha
Visit our website for more: https://www.overlookedalpha.com
I think it’s worth taking a look at Duolingo because its one of the best performing stocks this year, gaining over 90%.
The company helps people learn languages through its app and its got a successful marketing strategy via social media channels like Instagram and TikTok where it has over 6 million followers.
Based on the current share price, the company has a market cap of 5.6 billion dollars. With 600 million of cash and no debt the enterprise value is roughly 5 billion.
Revenue sits at 370 million over the last 12 months but the company is not yet profitable reporting minus 60 million in net income. Free cash flow is positive at 48 million and stock based compensation is also significant at 20% of sales.
However, the story with Duolingo is rapid revenue growth. Revenues have grown from just 71 million in 2019 to 370 million today, an increase of 5x.
Gross margins are good too, increasing from 71% in 2019 to 73% today.
Duolingo can also be proud of the positive impact it’s having. The app has over 500 million users, 37 million of which pay to improve their language skills. Compare that to Pinterest which has a similar audience and is valued at 18 billion.
Key to the success of Duolingo is it’s gamified approach to learning. And there’s no doubt the company can expand its offering to incorporate more subjects such as mathematics, physics and more.
#stocks #investing #stockstobuy #finance #overlookedalpha
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NewsTranscript
00:00 I think it's worth taking a look at Duolingo because it's one of the best performing stocks
00:04 this year gaining over 90%. The company helps people learn languages through its app and it's
00:10 got a successful marketing strategy via social media channels like Instagram and TikTok where
00:15 it has over 6 million followers. Based on the current share price, the company has a market
00:20 cap of $5.6 billion. With $600 million of cash and no debts, the enterprise value is roughly $5
00:26 billion. Revenue sits at $370 million over the last 12 months but the company is not yet profitable,
00:32 reporting minus $60 million in net income. Free cash flow is positive at $48 million and
00:38 stock-based compensation is also significant at 20% of sales. However, the story with Duolingo
00:45 is rapid revenue growth. Revenues have grown from just $71 million in 2019 to $370 million today,
00:53 that's an increase of 5x. Gross margins are good too, increasing from 71% in 2019 to 73% today.
01:02 Duolingo can also be proud of the positive impact it's having. The app has over 500 million users,
01:08 37 million of which pay to improve their language skills. Compare that to Pinterest which has a
01:14 similar audience and is valued at $18 billion. Key to the success of Duolingo is its gamified
01:20 approach to learning and there's no doubt the company can expand its offering to incorporate
01:25 more subjects such as mathematics, physics and more. Currently, Duolingo has four different
01:30 revenue sources. Subscriptions, which make up 74% of total revenue. In-app advertising makes up 12%,
01:37 the English test makes up 9% and in-app purchases make up 5%. Duolingo is unlike many companies at
01:45 the moment in that it's got no plans to rein in costs. It's successful marketing approach and
01:51 rapid growth means it's able to keep investing its profits. Although the company reports negative net
01:57 income, the structure of Duolingo's costs reveal how good the brand actually is. The company spends
02:03 only 18% on sales and marketing while it's growing revenue at 50% per year and 40% is being directed
02:10 to research and development indicating plans for new products. So the real problem here is the
02:16 valuation. At $5 billion, the company is quite expensive at 13 times revenue. Let's assume a
02:22 scenario where revenue grows 25% per year for the next 5 years and the business manages to get to
02:29 30% EBITDA margins. Under that scenario, EBITDA would be $340 million in 5 years time. A 30 times
02:37 multiple to that figure gets us to an enterprise value of roughly $10 billion and that works out
02:42 to an investment return of 15.3% per year under that scenario. That seems a little steep and if
02:49 TikTok gets banned that would probably hurt Duolingo's reach as well. But all that said,
02:54 this is still a young company and it's not facing a great deal of competition.
02:58 If it can surpass expectations then it could build a much larger empire. That's why I'm giving the
03:04 stock a bullish rating today but these are my personal opinions, not financial advice and I've
03:10 got no position in the stock at this time. For more detailed investing ideas visit our website
03:15 overlookedalpha.com