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Is Duolingo a Buy Once It Goes Public?

By Neil Rozenbaum - Jul 3, 2021 at 9:00AM

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Everything you need to know about Duolingo before it goes public.

In this video, I will go over everything you need to know about the Duolingo initial public offering that is happening later this year, including the company's latest financial statement and the Duolingo business model.

High growth

Duolingo reported first-quater 2021 revenue of $55 million, up 97% year over year. There are about 1.8 billion people in the pool of potential language learners. About 40 million monthly active users (MAU) use the app, and 1.8 million subscribe to Duolingo Plus, which accounts for 72% of its revenue. Another 17% comes from advertising, and the remaining is from the English language test.

The daily active user (DAU) count has gone up a lot in 2020 due to people staying at home, which has had a positive impact on Duolingo's business. Interestingly, as MAUs grew, so did the percentage of paid subscribers. So growth in free users resulted in even more paid users. More people are also choosing to subscribe for the year instead of one or six months.

Robinhood is allowing investors access to the Duolingo IPO.

What's next?

The company eventually plans to launch a "Duolingo Proficiency Score" across its offered languages, with the hopes of creating a widely accepted language proficiency standard.

It already tested something similar, called the Duolingo English test. In 2020, over 344,000 individual Duolingo English Tests were purchased compared to approximately 17,000 in 2019. Over 3,000 higher education programs around the world accept Duolingo English Test results as proof of English proficiency for international student admissions. These include 17 of the top 20 undergraduate programs in the United States according to U.S. News and World Report, including Yale, Stanford, MIT, Duke, and Columbia.

Duolingo confirmed that it is seeking potential acquisition candidates to add complementary services to its start-up, just like Kahoot! AS did and still does.

Risks

With every great business comes great risks. With Duolingo, it's the usual ones. If users no longer pay or use the app it won't be able to generate revenue. And if it doesn't innovate, someone else will come along and replace it. 

Duolingo was last valued at $2.4 billion. Since then it has grown its revenue by almost 100%, so it's safe to say that the valuation will be higher as well.

Watch the video below for the full insights.

*Stock prices used were the closing prices of June 1, 2021. The video was published on June 2, 2021.

Neil Rozenbaum has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Kahoot! AS. The Motley Fool has a disclosure policy. Neil is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

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