When is it too late to purchase stock in Duolingo?

An exceptional 2023 saw Duolingo (NASDAQ: DUOL) shares more than double from a 52-week low of $116.82 last May. The stock is near its December $245.87 52-week high. Do you miss out on Duolingo's massive share price growth? Not necessarily, but it tempers expectations since doubling shares in a year is no minor task. The company has significant advantages for long-term investors. Let's examine Duolingo as a long-term investment to assist you decide.

Duolingo's winning strategy Duolingo's stellar business performance drove its stock jump last year. In 2023, revenue was $531.1 million, up 44% from 2022. A winning product strategy makes the company successful. Duolingo now offers over 40 online language courses, including Latin and Navajo, up from a few in 2011.

Duolingo made learning fun by gamifying. This technique is now being used to math and music classes. Users increased due to the company's large language variety. Duolingo has over 50 million monthly active users since its 2021 IPO. Duolingo had 88.4 million MAUs in 2023, up 46% year-over-year.

Duolingo's freemium strategy helped it succeed. Users can use its digital education platform for free in exchange for ads. Customers can test Duolingo's automated teaching experience for free for as long as they desire, making it easy for new people to join.

Duolingo makes money from more than advertising. Users can subscribe to remove advertising. Due to Duolingo's enormous user base, only a small percentage of MAUs subscribe, yet it still represents 6.6 million people. Subscriptions make up most of Duolingo's sales. The corporation earned $404.7 million of its $531.1 million in 2023 from subscriptions.

Duolingo's strong finances Duolingo ended 2023 with good financials due to its high MAU and revenue growth. Free cash flow (FCF) rose dramatically to $144.3 million from $46.2 million the year before. Company financial sheets are outstanding. At the end of 2023, it had $954 million in assets, $747.6 million in cash and equivalents.

The liabilities were 298.5 million, but $249.2 million was deferred revenue. One year of subscription can be paid beforehand. These sales are a liability until Duolingo fulfills the membership requirements, then they become revenue. Duolingo's massive cash reserves provide it many business choices. Advertising was one area it spent extra on previous year to boost sales. The corporation strategically used social media ads.

Having friends and relatives join Duolingo together boosts retention and customer lifetime value. Duolingo plans to add social aspects to its product to boost retention because social drives usage.

Choosing Duolingo stock Duolingo CEO Luis von Ahn said on the latest earnings call that "we can't accelerate user growth forever." So the corporation is trying to convert more non-paying customers into subscribers. Duolingo Max, a premium subscription option, was introduced in 2023. This tier introduces new language education tools like Duolingo's AI-led conversations in the target language.

Management predicts "continued improvements in free-to-pay conversion." in 2024 due to its efforts to convert non-paying clients. As it adds non-language courses and increases its paying client base, Duolingo's revenue will rise over time. Duolingo shares are worth buying due to this and its good finances. Since the stock is near its 52-week high, investing opportunistically may be wise. Buy some shares now and build your position when the stock price drops.

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