In 2022, all stock market sectors are down except for one energy sector. However, given the transition to green power, that outperformance is unlikely to be sustained in the long term. It highlights how difficult it has been to find returns in this difficult economic climate, with inflation soaring and interest rates rising.
of Nasdaq-100 The tech sector’s leading index is down 33% year-to-date, clearly entering a bear market. But some individual tech stocks are doing much better now. This doesn’t necessarily mean it’s positive going into 2022, but it does suggest that it may perform best when the economy turns around, with fewer falls than the index.
duolingo (DUOL 1.30%) One of them. Duolingo’s stock is down only 6% this year, as his Duolingo business has proven to withstand recessions. Here are some reasons why investors should consider adding it to their portfolio now:
More people are paying to use Duolingo
Duolingo is the world’s leading language education platform with a mobile-first approach. We’ve taken advantage of the intuitiveness of modern smartphones to turn the learning experience into a game, adding competitive and even social media aspects to the equation.
It has been downloaded over 500 million times and as of the recent second quarter of 2022, there are 49.5 million monthly users on the platform. That’s 31% more monthly active users than at the same time last year, but the real story is how many users are paying to unlock additional features and improve their experience.
Duolingo now has 3.3 million paying subscribers, up 71% year-over-year and accounting for 7.2% of total monthly active users. As the chart below shows, the percentage of paying users continues to grow rapidly. This shows that learners see value in the platform.
The company only started monetizing on subscriptions in 2018, but it is already the most profitable mobile application in education. apple app store, and alphabet‘s Play Store.
Duolingo operates in a huge market
Despite its success so far, Duolingo may have just scratched the surface of its full potential. The company estimates that his 1.8 billion people worldwide are learning foreign languages, and that market could be worth more than his $47 billion annually by 2025. Digital language teaching is also becoming more popular than traditional methods, growing more than twice as fast, so Duolingo is perfectly positioned to reap the benefits of that change.
Much of the growth could come from emerging markets like India. In India, the company has previously emphasized that the cost of internet access is dropping rapidly. Duolingo predicts that between 2017 and the end of this year, her 500 million people in the country will access the internet for the first time, making it easier to learn global languages such as English.
In the second quarter, Duolingo also noted the resurgence of apps in China that were taken down last year as part of a broader ban on foreign platforms. It’s another huge market that only reopened in May and already accounts for his 2% of the company’s monthly active users.
this is why it matters
Duolingo’s revenue growth so far has been impressive. The company’s revenue was just $70 million in 2019, but the company’s guidance says he could balloon to $367 million this year, an average annual growth rate of 73% if targets are met. will increase. But this may just be the beginning of the road for Duolingo to capture his $47 billion opportunity in the next few years.
More importantly, in the near future, Duolingo has raised its forecast for 2022 not once, but twice. At the end of 2021, he led $342 million in 2022 revenue, and in the first quarter he lifted that figure to $358 million.
Importantly, Duolingo’s increasingly optimistic outlook stands in stark contrast to other tech sectors, which have been slashing numbers since the beginning of the year. This is the main reason why Duolingo’s stock fell just 6% in 2022, compared to the NASDAQ-100’s 33% loss. As such, investors may feel comfortable buying now, especially if the overall market starts to recover.
Alphabet executive Suzanne Frey is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no positions in any of the mentioned stocks. The Motley Fool holds positions in and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool recommends the following options: Apple’s March 2023 $120 Long Call and Apple’s March 2023 $130 Short Call. The Motley Fool’s U.S. headquarters has a disclosure policy.
