This language education platform continues to expand its use of artificial intelligence.A new year is right around the corner, so now might be a great time for investors to examine their stock portfolios and potentially pounce on new opportunities. If 2025 is anything like 2023 and 2024, the market will be dominated by artificial intelligence (AI) stocks, so that might be a good place to start.Duolingo (DUOL -1.23%) is the world's largest digital language education platform. It's using AI to create a powerf ...

Investment Rating - The report assigns a strong investment rating to Duolingo, highlighting its robust financial performance in Q3 2024 [1]. Core Insights - Duolingo's total bookings reached $211 million in Q3 2024, with subscription bookings contributing $176 million and non-subscription bookings at $35.1 million [1]. - Total revenue for the quarter was $193 million, with subscription revenue at $158 million and advertising revenue at $129 million [1]. - The company reported a gross profit of $140 million, maintaining a healthy gross margin of 72.9% [1]. - Adjusted EBITDA was $47.5 million, reflecting a profit margin of 24.7%, indicating strong growth in profitability [1]. User Growth Performance - Daily Active Users (DAU) grew by 54% year-over-year, reaching 37.2 million, showcasing effective user acquisition and retention strategies [1]. - Monthly Active Users (MAU) also saw a significant increase of 36% to 113 million, indicating successful efforts in enhancing user experience and engagement [1]. - The proportion of family plan users increased from 18% to 21%, reflecting growing market interest in this subscription service [1]. International Market Expansion - Duolingo plans to expand into Italy and Turkey after successful operations in Japan, South Korea, and France, employing localized marketing strategies to attract diverse users [1]. Financial Guidance - For the full year, Duolingo expects bookings and revenue to grow by approximately 36% and 40%, respectively [1]. - Q4 bookings are projected to reach $247 million, a 29% year-over-year increase, with revenue expected at $205 million, a 36% increase [1]. - The company anticipates a slight decline in gross margin due to increased costs associated with the expansion of Duolingo Max and its generative AI features [1]. - Adjusted EBITDA margin guidance for 2024 has been raised to 25.5%, up approximately 8 percentage points from 2023, moving towards a long-term target of 30% to 35% [1].

Duolingo, Inc. (DUOL) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.Analysts' growing optimism on the earnings prospects of this company is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions an ...

Group 1 - The market sentiment is bullish, driven by strong Q3 earnings, Donald Trump's return to the White House, and anticipated Fed rate cuts [1] - The S&P 500 has increased by more than 25% year-to-date, indicating significant investor confidence [1] - Gary Alexander has extensive experience in technology sectors, contributing insights on industry trends and advising startups [1]

Momentum investing is all about the idea of following a stock's recent trend, which can be in either direction. In the 'long' context, investors will essentially be "buying high, but hoping to sell even higher." And for investors following this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.Even ...

Core Viewpoint - Wall Street analysts' recommendations significantly influence investor decisions regarding Duolingo, Inc. (DUOL), but the reliability of these recommendations is questionable [1][3]. Brokerage Recommendations - Duolingo has an average brokerage recommendation (ABR) of 2.00, indicating a Buy, based on 15 brokerage firms' recommendations, with seven Strong Buy and one Buy, accounting for 46.7% and 6.7% respectively [2][12]. - Despite the positive ABR, relying solely on this information for investment decisions may not be advisable, as studies show brokerage recommendations often fail to guide investors effectively [3][8]. Analyst Bias - Brokerage analysts tend to exhibit a strong positive bias in their ratings due to vested interests, with five "Strong Buy" recommendations for every "Strong Sell" [4][8]. - This misalignment of interests can lead to misleading insights regarding a stock's future price movement [5][8]. Zacks Rank Comparison - Zacks Rank, a proprietary stock rating tool, categorizes stocks from 1 (Strong Buy) to 5 (Strong Sell) and is based on earnings estimate revisions, showing a strong correlation with near-term stock price movements [6][9]. - Unlike ABR, which is based solely on broker recommendations, Zacks Rank is a quantitative model that reflects timely earnings estimate revisions, making it a more effective predictor of future stock prices [7][10]. Earnings Estimates for Duolingo - The Zacks Consensus Estimate for Duolingo has increased by 7.2% over the past month to $2, indicating growing analyst optimism regarding the company's earnings prospects [11]. - This increase in consensus estimates, along with other factors, has resulted in a Zacks Rank 2 (Buy) for Duolingo, suggesting that the Buy-equivalent ABR may be a useful guide for investors [12].

Company Performance - Duolingo, Inc. shares have increased by 8.8% over the past month and reached a new 52-week high of $324 [1] - The stock has gained 39.2% since the beginning of the year, outperforming the Zacks Business Services sector's 26% and the Zacks Technology Services industry's 50.5% [1] Earnings and Revenue - Duolingo has consistently exceeded earnings expectations, reporting EPS of $0.49 against a consensus estimate of $0.36 in its last earnings report on November 6, 2024 [2] - For the current fiscal year, Duolingo is projected to achieve earnings of $2 per share on revenues of $736.1 million, reflecting a 471.43% increase in EPS and a 38.6% increase in revenues [3] - The next fiscal year forecasts earnings of $2.91 per share on revenues of $945.59 million, indicating year-over-year changes of 45.34% and 28.46%, respectively [3] Valuation Metrics - Duolingo has a Value Score of F, while its Growth and Momentum Scores are A and B, respectively, resulting in a VGM Score of B [6] - The stock trades at 157.7X current fiscal year EPS estimates, significantly higher than the peer industry average of 26.8X, and at 579.9X on a trailing cash flow basis compared to the peer group's average of 12.5X [6] Zacks Rank - Duolingo holds a Zacks Rank of 2 (Buy) due to rising earnings estimates, meeting the criteria for potential investment [7] Industry Comparison - The Technology Services industry is positioned in the top 29% of all industries, providing favorable conditions for Duolingo and its peers [10]

For the quarter ended September 2024, Duolingo, Inc. (DUOL) reported revenue of $192.59 million, up 40% over the same period last year. EPS came in at $0.49, compared to $0.06 in the year-ago quarter.The reported revenue represents a surprise of +2.08% over the Zacks Consensus Estimate of $188.67 million. With the consensus EPS estimate being $0.36, the EPS surprise was +36.11%.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall St ...

Financial Data and Key Metrics - Daily Active Users (DAU) grew by 54% year-over-year, building on last year's 60%+ growth [6][9] - Bookings and revenue grew 38% and 40% year-over-year, respectively, despite tougher comparisons [9] - Adjusted EBITDA margin for Q3 was 24.7%, with full-year guidance raised to 25.5% at the midpoint [9][13] - Family Plan subscriptions grew to 21% of total subscriptions, up from 18% at the end of last year [6] - Duolingo Max, the highest subscription tier, now includes an AI-powered video call feature and is available to roughly 50% of DAU, with plans to expand to 60-70% by year-end [10][11] Business Line Performance - Duolingo Max is driving significant growth, with early signs of strong demand for the video call feature, particularly among English learners [11][33] - The company is investing heavily in generative AI and automation to improve product efficiency and speed up feature launches [7][8] - The company is seeing a mix of new subscribers directly opting for Max and existing Super subscribers upgrading to Max [49] Market Performance - Growth is broad-based across all regions, with no single country growing significantly slower than others [39][40] - The company is expanding its international presence by adding country marketing managers in France, Korea, Italy, and Turkey [40][105] - Android users, who typically monetize less than iPhone users, are showing strong interest in Max, particularly for English learning [32][33] Strategic Direction and Industry Competition - The company is focusing on expanding its English learning offerings, particularly for intermediate and advanced learners, which represents a significant market opportunity [24][25] - Duolingo is leveraging generative AI to enhance product features, such as the video call with Lily, and to automate internal processes like content creation [8][56] - The company is also exploring opportunities in other subjects like math and music, which are expected to contribute more to growth in the coming years [44] Management Commentary on Operating Environment and Future Outlook - Management is optimistic about continued strong DAU growth, driven by word-of-mouth and product improvements [28][84] - The company expects to see sustained revenue growth above 25% in various DAU environments, supported by multiple growth levers [86][87] - Management highlighted the importance of the freemium model and the company's ability to collect large amounts of data to improve engagement and teaching effectiveness [130][131] Other Important Information - The company is experimenting with pricing and promotional strategies, particularly around the New Year's promotion, which is expected to impact Q4 performance [12][101] - The company is seeing strong engagement with the video call feature, particularly among English learners and more advanced users [96][97] - The company is also focusing on resurrected users, who now make up more than half of the top-of-funnel growth [75][76] Q&A Summary Question: What are the key drivers for reaching 20 million subscribers? [16] - The company plans to continue growing its user base through product engagement and social marketing, with a focus on converting more users to paid subscriptions [17][18] - Duolingo Max is expected to play a significant role, particularly in geographies where English learners are interested in practicing conversation [20] Question: How is the company progressing with intermediate English learning? [22] - The company has made significant progress in developing intermediate and advanced English content and improving user placement within the app [25][26] - Growth in this segment is expected to be driven by word-of-mouth, with marketing efforts focused on influencers and user-generated content [28][37] Question: How is the uptake of new features on Android? [30] - Android users typically monetize less than iPhone users, but the company is seeing strong interest in Max features, particularly among English learners [32][33] Question: What is the marketing strategy for intermediate English learning? [34] - The company is leveraging influencers and user-generated content to promote its intermediate and advanced English courses [35][37] Question: How is the company managing macro risks? [43] - The company believes there is significant runway for growth in the language learning market, with 2 billion people globally learning languages and only 100 million monthly active users on Duolingo [44] Question: How is the company balancing scaling and reinvestment? [46] - The company is focused on scaling profitability while continuing to invest in R&D, with incremental margins above the long-term target of 30-35% [46] Question: What is the conversion cycle for Max subscribers? [47] - The company is seeing a mix of new subscribers directly opting for Max and existing Super subscribers upgrading to Max, with early signs of strong demand for the video call feature [49][50] Question: What are the building blocks of DAU growth for 2025? [52] - The company expects to see continued growth in both penetrated markets like the US and in English learning, driven by word-of-mouth and product improvements [53] Question: How is Max impacting margins? [55] - Max is accretive to gross profit dollars but has a lower gross margin percentage due to higher costs associated with generative AI and the video call feature [59][60] Question: What is the pace of product testing? [63] - The company is running more tests per quarter, with a success rate of around 50%, and expects to continue seeing improvements in engagement and monetization [64][65] Question: How is the family plan performing? [72] - The family plan has grown to 21% of subscriptions, driven by increased visibility and minor feature improvements [73][74] Question: How is the company addressing resurrected users? [75] - Resurrected users now make up more than half of the top-of-funnel growth, and the company is focusing on improving the experience for users returning after a hiatus [76][77] Question: How is subscriber retention trending? [78] - Overall retention has remained stable, with no significant changes in retention trends for Super or Max subscribers [79] Question: How should investors think about the relationship between DAU and revenue growth? [82] - The company expects strong DAU growth to continue, driven by word-of-mouth and product improvements, with revenue growth expected to remain above 25% [84][86] Question: How is Duolingo Max performing compared to Super? [91] - Max is currently positioned as a premium offering focused on conversation practice, while Super is focused on convenience features [93] Question: What is the early data on the video call feature? [95] - The video call feature is showing strong engagement, particularly among English learners and more advanced users, with plans to make the experience more realistic and engaging [96][97] Question: How is the company approaching the New Year's promotion? [100] - The company is running experiments around the New Year's promotion, with the impact already incorporated into Q4 guidance [101] Question: How is international growth tracking? [103] - The company is seeing strong growth in international markets, with recent additions of marketing managers in France and Korea, and plans to expand to Italy and Turkey [105][106] Question: How is the US market performing? [110] - The US market is growing at a similar rate to the global average, with no significant disparity between regions [112] Question: What is the traction for Max? [111] - The company is seeing strong traction for Max, particularly with the introduction of the video call feature, which has made it easier to market the product [113] Question: How is ARPU trending? [111] - ARPU has trended towards 0% year-over-year, with expectations for it to remain flat or increase slightly, driven by the mix of Super, Family, and Max plans [114][115] Question: How is Max adoption split between English and non-English learners? [119] - Max adoption is currently higher in wealthier countries, but the company expects this to shift as the product becomes available in more English-learning countries [120][121] Question: What is the long-term view on Max's paying ratio? [127] - The company does not yet know where Max's paying ratio will settle, but it expects it to vary by country and relative pricing [128] Question: How does Duolingo differentiate itself from competitors? [127] - The company differentiates itself through its freemium model, strong engagement features, and large-scale data collection, which allows for more effective teaching and marketing [129][130]

Core Insights - Duolingo, Inc. reported quarterly earnings of $0.49 per share, exceeding the Zacks Consensus Estimate of $0.36 per share, and showing significant growth from $0.06 per share a year ago, resulting in an earnings surprise of 36.11% [1] - The company achieved revenues of $192.59 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 2.08% and increasing from $137.62 million year-over-year [2] - Duolingo has consistently outperformed consensus EPS and revenue estimates over the last four quarters [2] Earnings Outlook - The sustainability of Duolingo's stock price movement will depend on management's commentary during the earnings call and future earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.46 on revenues of $201.42 million, and for the current fiscal year, it is $1.87 on revenues of $736.1 million [7] Industry Context - The Technology Services industry, to which Duolingo belongs, is currently ranked in the top 34% of over 250 Zacks industries, indicating a favorable outlook for stocks in this sector [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5][6]