I took the opportunity (today’s almost 10% pop) to sell my tryout position. While what DuoLingo has done so far is incredibly impressive, the MAU and DAU numbers are already decelerating. Paid Subs (and revenue) will follow.
Still, there’s a question of what the business is worth, so I looked at their fantastic EPS progress and asked how much better it can get. I think a ton. Could the ~17% bottom line from this quarter double? Absolutely…maybe even more. But even if you give them a 35% or 40% bottom line this quarter, it would have been just over a dollar of EPS. Add in some revenue growth and maybe they can get it to 1.50 or even 2.00 per quarter, but even that’s 8.00/year, which may not support a $200 share price if growth is slowing to a halt.
Now, this could still turn out well for them. Maybe they innovate and other products come alongside their current offering. Maybe churn improves. But for me, I think this is in the “too difficult” pile. Sure isn’t a no-brainer for me.
Bear