The ed-tech company has filed to go public with a $2.4 billion valuation, but when can you buy Duolingo stock and is it a good investment?
Boasting impressive revenue growth, language-learning app developer Duolingo filed for an initial public offering (IPO) and is set to make its debut today. Following news that it had raised $35 million back in November from Durable Capital and General Atlantic, Duolingo’s last reported valuation was $2.4 billion.
Thanks to an increase in people being stuck at home during the pandemic, Duolingo has seen a boost in active users turning to the app to learn a foreign language. In March 2020, the firm saw a 101% increase in users which resulted in the highest levels of traffic the company has ever seen. As a result, the language app maker follows a long line of companies with impressive valuations making their stock market debuts recently. Duolingo is hoping to capitalize on the growing interest in emerging industries like the ed-tech sector with its debut.
What is Duolingo?
Duolingo offers users who want to learn a new language a website and mobile app to do so. The service offers 40 languages and has been immensely popular with users across different age groups.
Duolingo has stood out in the ed-tech space as it aims to make learning grammar and vocabulary fun by providing games, rewards, and immediate grading.
When is Duolingo going public?
Duolingo is making its market debut on Wednesday, 28 July on the Nasdaq exchange after the closing bell under the ticker ‘DUOL’.
What price are Duolingo shares going public at?
Duolingo shares are expected to cost between $95 and $100 per share. The company intends to raise $511 million through the sale of 5.1 million shares.
In its filing with the Securities and Exchange Commission, Duolingo said that its revenue increased from $70.8 million in 2019 to $161.7 million in 2020, a 129% jump. In Q1, the company also doubled its year-over-year revenue, from $28.1 million to $55.4 million. The company’s subscription-based model has been successful, with 73% of its latest quarterly revenue coming from subscriptions, while 17% came from advertising and around 11% came from the Duolingo English Test.
In 2020, its net loss increased to $15.8 million, up from $13.6 million in 2019. However, its net margin improved in 2020 at the same time as its revenue doubled and losses barely grew. Therefore, Duolingo’s lack of profitability should not be a huge concern for investors and means the company has the potential to be a worthy investment.
Duolingo’s growth potential
Duolingo stated that it has more than 500 million downloads and around 40 million monthly active users. The popular learning platform relies on an ad-based ‘freemium’ business model so most of its users do not pay for its services.
Duolingo has big ambitions outside of language learning though. The company said in its filing that it hopes to build on its “mobile-first, gamified approach to education.” Just last year the firm unveiled Duolingo ABC, an app that offers early literacy skills to young children.
These innovative ideas prove how Duolingo still has further growth potential as it launches new products. Some experts were concerned that Duolingo had run out of growth but it actually grew by almost 100% in Q1, which should temper any concerns.
Wall Street believes that Duolingo has what it takes to dominate the edtech space as its products and services have already proven widely successful. As cases of COVID-19 are still spreading with new variants, the IPO should be a hit as investors look to new tech investment opportunities.
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