Why DUOL is gonna win

Duolingo has the best founder in education sector. They are mission driven, have the best eng team in language learning by a mile, growth has been nothing but remarkable. And they now have the opportunity to build a personalized AI tutor for hundreds of millions of people.

Their stock price has tanked bc their forward growth rate has stalled. CEO said they will have to focus on growth not profitability, and market didn’t like it.

I believe it’s a short-term noise.

No one can deny Duolingo team can execute. They built the most popular education brand, have consistently improved all metrics across their business: conversion, profitability and retention. And their growth was mostly organic via word of mouth. All incredibly difficult things to pull off on consistent basis.

If their new goal is to dramatically improve their product via AI, and double their users by 2030, it’s highly likely they do it again given enough time.

DUOL has hit the local top in terms of their growth but there are so many ways for them to grow and improve profitability. And AI is the greatest opportunity for them, not an existential threat. AI ins’t gonna stop people from learning languages. Especially not the target customers of DUOL who wanna do it mostly for fun and hobby. AI is gonna enable much better Video Call with Lily, which will improve conversion rates, they are going to launch new courses faster with AI, expand into new categories without increasing the operational cost.

DUOL is just $3.9B now. My DUOL thesis is that it’s a great R/R bet. A limited downside at current price. perhaps max 40% downside. And if DUOL just maintains the growth rate of 20%, they will return fine. If they execute on their stated goals, they will compound 30% CAGR the next 5 years. Given they have massive data around language learning behaviors of hundreds of millions of users, one of the best engineering teams in B2C, and the top tier founder, they are the best positioned to take advantage of AI.