DUOL Stock Soars on Q2 Earnings: What is Duolingo Doing Right?

  • Shares of Duolingo (DUOL) stock are up more than 14% this afternoon after the company reported strong Q2 earnings.
  • Both a beat on the top line and a massive bottom-line beat have investors rethinking their fundamental thesis around this company.
  • Here’s what investors may want to know about these numbers and what they could mean for the company moving forward.
DUOL stock - DUOL Stock Soars on Q2 Earnings: What is Duolingo Doing Right?

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Duolingo (NASDAQ:DUOL) is a company really taking off today. Despite the overall market being up considerably today, investors may look at the 14% surge in DUOL stock this afternoon and wonder what the company is doing to propel so much investor interest.

Well, the online language learning company just released its second-quarter earnings to the cheer of investors. On the revenue front, Duolingo brought in $178.3 million, higher than the $177.1 million analysts had penciled in. But it was really the company’s bottom-line beat that caught investors off guard. Duolingo wrangled in 51 cents of earnings per share, well above analyst estimates of only 32 cents.

This earnings beat reflected strong EBITDA margins during the quarter (up to 27% during this past quarter relative to only 17.6% in the same quarter the year prior), as efficiency initiatives are clearly paying off. The company’s free cash flow (FCF) also surged more than 30%, and given that a stock’s valuation is supposed to be the present value of future cash flows, these numbers are truly staggering.

Let’s dive more into these results and why Duolingo is a hot buy today.

DUOL Stock Surges After Massive Q2 Earnings Beat

Duolingo’s recent results were great, but one thing I didn’t mention above is that the company also raised its full-year outlook on these numbers. That’s not necessarily surprising, given the degree to which Duolingo smashed earnings estimates. But it paints a rosy picture moving forward, as more and more individuals are looking to travel abroad.

In many respects, the remote work trends and many post-pandemic work-life shifts we’ve seen have died down. However, travel trends appear to be more secular than not, with many individuals looking for ways to learn new languages that don’t necessarily follow the more traditional methods.

In my view, DUOL stock deserves to be up to the degree it is today on this news. This was an impressive earnings beat and one that warrants a deeper look from value-conscious investors right now.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.


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