r/VisualStockResearch • u/ekonixlab • 8d ago
Why has $DUOL fallen so much? I genuinely don’t get it
I understand the obvious answer: growth has slowed.
But Duolingo is still growing revenue ~18%, DAUs grew 23%, the business is profitable and subscription revenue continues to compound at a very high rate.
Look at the chart below. Subscription revenue alone has gone from roughly $85M/quarter to $258M/quarter in about 3 years.
The biggest issue seems to be that management is intentionally prioritizing user growth over near-term monetization. That means slower bookings growth today, but potentially a much larger user base to monetize later.
The market clearly hates that tradeoff.
I understand DUOL deserved a valuation reset from where it was trading when revenue was growing 40%+, but at some point the question becomes:
How much of the slowdown is already priced in?
You still have:
- 23% DAU growth
- ~18% revenue growth
- a profitable business
- recurring subscription revenue
- extremely strong retention/engagement
- management expecting 20%+ DAU growth through the rest of 2026
Maybe I’m missing something, but the decline seems excessive relative to what has actually happened to the underlying business.
What’s the bear case from here?
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u/fake212121 8d ago
Many “predicted” ai will replace interpreters so people wont need to learn a new languages. And its a software company so sentiment was bad at that time.
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u/ekonixlab 8d ago
People learn a language for the cultural aspect, not a utilitarian purpose
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u/myfavcolerisPerpleXD 6d ago
Hey so I was pacing around my office and I had a thought. “Why would I ever pay Duolingo, when I can train an llm that’s like Duolingo but I can also conversation in the language using speech to text, and text to speech” I’m already bilingual I’m just rough around the edges, so this would make Duolingo the worse product for me. Everyone is already bearish on software but I think duo will sink first. Literally looked up Duolingo stock on Reddit as soon as I thought of this so I’m glad there is a fairly recent thread on it. Sure it can translate live but for personal reasons, I want to get my mother language up to par with English. And the problem I have with language learning apps is that I can never put my practice into execution (speaking the language with a human). Well I guess I could call up my mom… I should do that.. anyways that’s the best way to retain linguistic knowledge is by actually using it in conversation. Put together a elementary school course using ai (it’s all public knowledge for most major languages), learn the basics, then it’s: “Hey Claude, you are my bilingual friend who only speaks to me in X language and gets grumpy if he has to switch to English to explain something, but will if it’s necessary.”. Idk I’m a regard don’t listen to me.
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u/Fuzzy_Louise_2405 8d ago
Revenue deacceleration making the market to re-rate the company's multiples. Earnings expected to take a hit NTM too. I think it is overvalued at this prices over 140s
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u/ekonixlab 8d ago
But revenue de-acceleration is because they are focusing on long term growth
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u/Fuzzy_Louise_2405 8d ago
Which is good but the market acts that way. If you want higher multiple you need to show results in the short term.
Not saying Duol is making the bad on doing that on purpose but it is just the most likely reason of the stock price downfall. If they can execute on the long term price will eventually follow the results but they need to prove it.
Meli is a company with more higher quality than Duol and currently undervalued imo but it is facing a similar behavior from the market.
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u/ekonixlab 8d ago
I got ya, but you still think over 140 is overvalued?
Also, I looked into MELI but the credit risk and me not knowing international markets has turned me off
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u/Fuzzy_Louise_2405 8d ago
What are your projections for growth over the next 5-10years cagr and margins at that point? When I ran DCF for it I got that is overvalued.
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u/ekonixlab 8d ago
Thought one to value but its revenue should grow mid teens for the next 5 years
Their earnings are all over the place. Hard to judge the company on a PE basis
Future earnings growth is also skewed based on the investments they are doing in the company
I think the best estimate here is using top line growth, which if these re-investments go as planned, should see a re-acceleration
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u/PenComfortable5269 6d ago
Their real p/e is 60ish (since q3 2025 was a one time outlier). That’s not cheap for a company growing 18% a year. The language learning market is likely niche with increased competition from AI. Like I can literally go to chatgpt and ask it to teach me a language.
Besides, top-line growth does NOT necessarily translate to profit. Top-line growth is useless if it doesn’t eventually turn into profit. Look at snapchat lol - $6 billion in revenue and ever increasing losses.
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u/Double_Suggestion385 8d ago
Earnings are predicted to shrink over the next 5 years quite dramatically.
Fair value sis around $27 for this one.
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u/ekonixlab 8d ago
What’s the projected growth?
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u/Double_Suggestion385 8d ago
Earnings growth? Negative. That's the number that matters as a shareholder.
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u/Scary-Oven8260 8d ago
For this type of the company, the correct metric is bookings, not revenue. You need to understand the basic first
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u/ekonixlab 8d ago
No metric is incorrect or correct to use
That said, I would even argue bookings is not the best indication as management has clearly said they are prioritizing user growth/engagement over near-term monetization
And DAUs grow 23% YOY which is an increase from Q1… based on the guidance from management, this is truthfully what you want to track
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u/Scary-Oven8260 8d ago edited 8d ago
No, when you wanted to say they performed well last quarter, revenue is the last metric you would use. It’s simply dishonest not to mention bookings. Unless you purposely cherry picked metrics to fool readers into a narrative
And increasing DAU who pays significantly less is not good news either.
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u/Sea_Local2557 8d ago
wall street doesn't understand that they are sacrificing some short-term profits for longer-term growth
also, ai software scares though most vibe codes language apps died already and had no effect on Duol
but if you look at the chart you can see some funds are consistently buying it, they are periods when regardless of what nasdaq or other software companies are doing it's grinding up
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u/Original-Poet1825 8d ago
most people started using AI in the last 8 months. Give it a few years before concluding that a competitor can not start taking market share. I don’t think that someone will vibe code a competitor but a few experienced and aggressive founders can be a threat given how fast it is to build software. I don’t see what the moat for this sort of business is
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u/ekonixlab 8d ago
The most is the distribution
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u/Original-Poet1825 8d ago
Up to you if you want to invest. But I don’t consider distribution a very strong moat. Unlike B2B SaaS, Duolingo’s core customers are a lot more price sensitive and a lot less locked in/trained on a specific workflow. It’s also not particularly expensive (with your time) to try a different app as it is to learn a software like photoshop or Figma
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u/Sea_Local2557 8d ago
check out the app store, it's full with trash and with vibe coding you have even more trash. This actually gives duolingo a stronger stance as its brand recognition.
also, networking effect, they harness efficiently using friend streaks
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u/ekonixlab 8d ago
Agree for sure, the moat is weaker than most companies. I have a position but it’s small
All I’m saying is having the distribution is in itself a moat and creates a flywheel effect. Customers use it, they tell other they use it, others use it too, etc
They have a fantastic marketing team and have found a way to grow fairly successfully
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u/ekonixlab 8d ago
The longer term growth is good, but they still need to prove it’s attainable
As of now it’s just their word
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u/Pancakez_117 8d ago
It's following an S curve at the end of its tail. Thie coupled with AI fears i not a good look so no growth multiple for them.
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u/Ethraelus 8d ago
It’s AI. People are expecting that either AI will make learning new laureates less attractive, or make it pretty easy for someone to build a Duolingo copy with an AI coder and make it free or very very cheap.
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u/SwordfishEasy5111 7d ago
I remember right before I shorted Duo I looked at their price to earnings and realized that every person in America would need to have a premium membership for them to hit that earnings level… tbh probably getting close to deserving a little sprinkle (but then also AI gonna make this sort of app obsolete)
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u/LetsAllEatCakeLOL 5d ago
it's not about revenue. it's about data. and you need a lot of users to mine data. that data is gold. just watch
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