Down 80% From Its 52-Week High, Is Duolingo Stock a No-Brainer Buy?
Key Points
Duolingo expects its top line to grow between 15-18% this year.
Its business is slowing down as it prioritizes growing its user base.
The stock is incredibly cheap when compared to the S&P 500.
Duolingo (NASDAQ: DUOL) stock is trading as if its business is in deep trouble. The sell-off has pushed it to a multi-year low, hitting levels it hasn't reached since early 2023. It wasn't all that long ago, however, that the stock was looking much more promising, with its 52-week high being a shade under $545. These days, however, it's unclear whether it will even stay above $100, as it's now down around 80% from its high.
What's going on with the company, and is it in serious trouble, or is the tech stock trading so low that it's effectively become a no-brainer buy?
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The company's recent financials looked solid
Duolingo recently reported its first-quarter results, which covered the first three months of 2026, and there weren't any glaring problems. Revenue rose by 27% to $292 million, and net income was up by 24%. Its profit margin remained healthy at around 15% of the top line. Impressively, its free cash flow also rose by 43% to $147.8 million.
The business is looking good, despite concerns of artificial intelligence (AI) potentially disrupting its growth potential. What may be a little worrisome is a slowdown in its growth rate; for the current quarter, the company anticipates that its revenue will grow at a rate of just 17%. It believes, however, that it's still on track to hit its full-year guidance of around 15-18% in top-line growth. Duolingo's growth may be slowing down, but those are still solid numbers overall.
Is Duolingo's stock too cheap to pass up?
Due to its steep sell-off, you can buy Duolingo stock at a considerable bargain right now. It trades at 12 times its trailing earnings and a multiple of 14 based on analyst projections of future profits. By comparison, the average S&P 500 stock trades at 26 times trailing earnings and a forward-earnings multiple of 22. Duolingo trades at a steep discount.
Its current valuation may be appropriate for a no-growth stock, but Duolingo's business is still expanding. While its growth rate may be slowing down, management said that would happen as it is focusing primarily on growing its user base over monetization. It's a strategy that could pay off over the long term.
While I wouldn't call Duolingo stock a no-brainer buy simply because there are some risks due to AI, I think there's a strong contrarian case to be made as to why it can generate strong returns for investors who buy right now. If you're willing to be patient and buy and hold, Duolingo stock may be worth adding to your portfolio today.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Duolingo. The Motley Fool has a disclosure policy.
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