Duolingo stock: How Duo captured the attention of students, social media and investors – The Average Joe
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    Duolingo stock: How Duo captured the attention of students, social media and investors

    victorlei

    October 12, 2022

    You may have come across Duo on social media. The green owl is the mascot of the language-learning app Duolingo (NASDAQ:DUOL).

    Duolingo has nearly 50M monthly active users with over 3.3M paying customers. Their stock is also far outperforming benchmark indices. In 2022, $DUOL is down 7% while the Nasdaq is down 34%.

    What makes Duo so special?

    Duolingo is an outlier in the edtech sector, where online course providers like 2U and Coursera have lost over half their value this year.

    Duo differentiated itself with a focus on building a great app that keeps users engaged — one that offers:

    • An engaging experience that actually makes learning languages enjoyable.
    • Daily streaks, prizes and competitive boards that keep users coming back.

    How much do they care about the experience? Their first acquisition was a small animation studio, Gunner — announced last week.

    The state of Duolingo

    1/ Losing money, but less than many other tech stocks. In the recent quarter, Duo lost $15M on $88.4M of sales. They’re also in a strong financial position with $591M in cash — which hasn’t changed much since they went public.

    2/ Duolingo is good at getting customers to pay. From 2020 to 2022, the number of paid subscribers as a percentage of total users doubled from 3.6% to 7.2%.

    3/ CEO has a habit to “underpromise and overdeliver.” Since going public in 2021, they’ve beaten expectations each quarter, even in the current market condition.

    4/ Growth potential in China, a strong market of English learners — which only made up 2% of its monthly users. In June, Duolingo finally regained its app listing in China after disappearing for a year.

    Investors: Fad or trend?

    Duolingo reported a 300% increase in new users at the start of COVID. Are users sticking around? So far, yes.

    • A Lingoda survey showed that 90% of 1,500 students planned to stick with their studies post-COVID.
    • Monthly active users grew 31% in the recent quarter, with the number of paying users growing even stronger at 71%.

    Is language-learning another consumer fad destined to fade? Or will a strong team, product and corporate culture win out?

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