IBD 50 growth stock Duolingo is in a consolidation with a buy point of 168.40. Shares rebounded from the 50-day line on Monday.
DUOL has more than doubled so far this year, gaining over 120% from 71.13 in December, according to MarketSmith. In recent sessions, the growth stock rallied as it formed the right side of the cup in a four-day winning streak with increasing volume.
There also was an aggressive entry for the stock around 144 using a trend line.
The Composite Rating is an adequate 88, while the RS Rating is impressive at 95. The EPS Rating lags at 56. Sales growth has been steady, ranging between 40% and 51% over the past eight quarters. The company is yet to turn profitable. Sales grew 42% in Q1 to $115.7 million from a year ago, while a loss of 6 cents per share showed an improvement from a 31 cent loss over the same period.
During the quarter, monthly average users grew 47% to 72.6 million, while daily active users showed a more impressive 62% growth to 20.3 million from a year ago. Paid subscribers also spiked 63% to 4.8 million. Shares retook the 50-day line decisively on May 10 after earnings before forming the current base. The company expects current-quarter revenue of $122 million to $125 million. For the year, the company gave a revenue guidance of $500 million to $509 million.
Second-quarter earnings are due on Aug. 8. Analysts at S&P Capital IQ see a loss of 19 cents per share, but solid 40% sales growth to $123.81 million for the quarter.
The language software stock ranks No. 2 in the computer software-education and media group, which holds a lofty No. 6 among IBD's 197 industry groups.
Growth Stock Partnership With ChatGPT
Duolingo launched in 2012 and it went public in 2021, during the depths of the pandemic. The company offers a mobile learning platform for languages. The app offers 40 languages, including Spanish, English, French, German, Italian, Portuguese, Japanese and Chinese through the Duolingo app. The company sees growth drivers in a 2 billion addressable market of online language learners.
In March, the company partnered with ChatGPT to offer generative AI tools to its language learners through Duolingo Max.
More mutual funds have been buying the stock over the past three quarters. Invesco Discovery Fund (OPOCX) and Lord Abbett Dev Growth Fund (LAGWX) hold shares of Duolingo. Exchange traded funds hold the stock too. Vanguard Small Cap ETF and iShares Russell 2000 Growth ETF have positions in the language learning app maker.
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