Duolingo Undervalued Amid Revenue Multiples Shift
"Now if we look at Dolingo's valuation it was trading at 160 times earnings and now trading at 50 times earnings. This is GAAP earnings by the way, while Non-GAAP is about 27 times. I believe we should be looking at a price to sales ratio for Dualingo as the company is more focused on growth. Dualingo went from 22 times price to sales ratio to about seven times. I even talked about it myself, but seven times for me is very compelling for a company growing revenues at high rates. So my thesis on Dualingo is that the stock is undervalued here, much better valued than it was a few months ago."
The speaker highlights a dramatic change in valuation for Duolingo, noting a decline in earnings multiples from 160x to 50x and a significant reduction in the price-to-sales ratio from 22x to 7x. He argues that despite the apparent risk from slowing revenue growth, the focus on growth makes the current valuation compelling and undervalued compared to a few months ago.
Cautious Outlook on Duolingo
"Now, another stock that's been beaten down this year is Duolingo. This is a stock that seemingly nobody wants to own, down 42% year-to-date and 38% in the past year. While some believe it's a new category in core education, the story remains speculative as its fundamentals have yet to prove a durable moat."
Duolingo is seen as speculative amid a significant sell-off, with its fundamentals not yet clearly established to justify a strong long-term narrative.
Buy the Dip on Duolingo (DU)
"Beginning with stock number one, which is going to be Duolingo, stock ticker DU. And Duolingo is a subscription-based learning platform. The company recently reported earnings and the stock got absolutely crushed after the report with the stock falling more than 25% on soft guidance. In fact, the company reported a double beat with the Q3 EPS blowing away expectations and revenues beating the 11.4 million that analysts were looking for. But you have heard me say this before. It's less about the results and more about the guidance. When you and I invest in a stock today, it's great what they've done in the past. But our investment today is for the future. And I believe although investors are throwing out and slamming that sell button right now on Duolingo, it is presenting a huge opportunity for long-term patient investors."
The speaker identifies Duolingo as a prime buy-the-dip candidate after a steep sell-off driven by soft operational guidance, despite strong past earnings. He believes the current price discount offers a long-term opportunity, supported by future growth catalysts like AI-driven enhancements in its subscription platform.
Duolingo Oversold Opportunity with Strong Long-Term Catalysts
"Number five, Dualingo. Dol. Dualingo is the biggest and most popular language learning app in the world. Stats show Duolingo commands around 60% of all language learning app usage in its category. And the online language learning market is expected to continue to grow pretty damn fast. They reported a great quarter and explained that they have decided to aggressively put user growth above short-term monetization, destroying their stock with a 67% dump from just this past summer's high. Despite bears expecting the stock to go to zero, it is a free cash flow machine printing more cash every quarter, making it a massive arbitrage opportunity."
The speaker outlines Duolingo's dominant market position, significant growth in user data for AI adoption, and a sharp stock dump that presents an arbitrage opportunity as the company continues to generate strong free cash flow.
Avoid Buying Duolingo Amid Slowing Growth Momentum
"So then the ultimate question is am I buying Dualingo here? And the answer is no. And the reason is because I am not personally confident in this business's moat and potential to take a position in the stock and feel comfortable with it."
The speaker expresses a clear decision not to buy Duolingo due to concerns over decelerating growth—particularly in total bookings and revenue momentum—even though recent financial metrics remain strong. This caution stems from uncertainty about maintaining a long-term competitive moat.
Long Duolingo Trade Call via Selling Palantir
"I'm going to try going long dual lingo. I'm crazy. I'm crazy. Day trading buying power cannot be used to buy this security. What can I use? What can I use to buy this security? Stupid. You know what? I'm going to sell a little bit of Palanteer just to buy a little bit of Duolingo. Quantum Dolingo. Qingo. What do you guys think?"
The speaker issues an explicit trade call to go long on Duolingo by selling some Palanteer to free up margin. Despite the chaotic delivery, the call is actionable and signals bullish conviction on Duolingo, positioning it as a trade based on immediate buying power constraints and market momentum.
Trade Call: Potential Rebound Setup for Duolingo
"The stock pick that started to get very attractive and is not on its first red candle, but it's had a series of red candles and has had an extremely strong fall off from the top is Dol Dolingo. Dol Dolingo is a gamified learning platform that teaches languages core and newer math and music with ads and subscriptions, plus an English proficiency test for schools serving consumers, kids, educators, and institutions. They use a product called Bird Brain, which autocreates lessons, audio content at scale, as well as Power GPT4 tutoring features, role-play, explain my answer, and it helps generate endgrade tests. So, this is a company that's embracing innovation and was extremely fast growing. So, why has the stock fallen so much? Well, they sank on a weak outlook. The management team pivoted from growth to quality of business, which caused Wall Street to freak out. It dropped $27%. It was a $70 drop."
The speaker identifies Duolingo (implied by 'Dol Dolingo') as an attractive trade setup after a significant drop triggered by a pivot in management strategy. He highlights the extensive decline and technical overselling, suggesting that following key chart signals could offer a potential entry after a short waiting period.
Duolingo Rerating Due to Slowing Bookings
"Now, if we look at the 2025 outlook, they have something here called bookings. The Q4 bookings, so next quarter to grow 22% year-over-year or 19% on a constant currency basis at the midpoint. Now, why is this important? It's important because Wall Street believed that they were going to grow their bookings at around 24%, which is more than what they said they're going to grow. So, Wall Street's saying, "Oh, wow. Not only did they not meet their booking estimates or exceed it, but they didn't even come close. They're, they're below what we expected them to grow." And so, we see a company that's growing slower than expected. When a company's priced at a premium multiple and revenue slows down further than expected, you get stock prices rerated. So that is the single reason the stock is down today."
The speaker explains that Duolingo is experiencing a rerating as its Q4 bookings growth of 22% (or 19% constant currency) fell short of Wall Street's 24% expectation. This slower-than-expected future revenue growth is prompting a reevaluation of the premium multiple, despite strong user engagement metrics elsewhere.
Duolingo Appears Undervalued Despite Selloff
"Now in terms of my valuation model, I'm taking an extremely conservative valuation model. In my previous video, I put up 30% for 2026 and 25 2020 and I use 30P. I got $582 per share upside potential over the next 5 years. And this one, I'm going to be even more conservative and I'm going to use 30% 2515 to account for a potential deceleration in earnings Porsche growth. Although the company could be much more profitable than it is, they have insane gross margins. So if they want to really expand profitability, they can do it and I believe that will likely be conservative. The current PE ratio is actually around 30 times earnings as of the selloff around 30 times. I took it down to 25 times earnings as I believe the company will have much higher margins in the future."
The speaker outlines a conservative valuation model for Duolingo, suggesting significant upside potential despite the 20% after-hours drop. By lowering the PE ratio assumption from 30 to 25, he indicates that the stock could offer over 100% upside over the next 5 years, making it an attractive long-term opportunity even after a temporary deceleration in quarterly growth.
Cautious Long-Term Play on Duolingo Amid Volatility
"Duolingo is a stock that everybody has an opinion on. I own a little position in it, and right now I'm in the red. I believe this quarter, the monthly active users might be the weak spot, even though daily active users and paid subscribers remain strong. It's one of the most volatile stocks I've been a part of, with the potential to swing up or down by 15% or more. As a fundamental investor, I plan to stay invested for the long term, banking on its growth in revenue and earnings per share over time."
The speaker discusses Duolingo's inherent volatility and near-term challenges with monthly active user growth while acknowledging its strong long-term fundamentals and conversion metrics. His position is one of cautious long-term commitment despite short-term price swings.