shares of Duolingo According to data from S&P Global Market Intelligence, DUOL is up 1.3% (0.29%) in September. The price increase in itself isn’t impressive, but the language learning specialist achieved this marginally positive return in a month in which S&P500 The index fell 9.3%. In this context, the silence of Duolingo was like a bucket of water in the desert.
The company didn’t have much news to announce in the past month. CEO Luis von Ahn appeared a few times in newspapers and social media feeds and spoke about his Guatemalan background and Duolingo’s ban on possible abortions in his home state of Pennsylvania, but those incidents didn’t move the stock.
Instead, shares rose on September 9th and 28th, the two strongest days for the broader market over the period. Over those two days, the S&P 500 was up 1.9% and 1.5%, respectively, while Duolingo was up 7.3% and 4.5%, respectively.
A formerly high-flying growth stock, Duolingo has become increasingly sensitive to market sentiment, rising and falling faster than most of its peers. As such, it was poised to recover faster than the broader market over the past month. In September, Duolingo shares fell 27.4% over the past 52 weeks, far more sharply than the S&P 500’s 12.6% drop over the same period.
Never pay attention to a falling share price; Duolingo’s business has never cooled, so it makes sense to see some color back in the stock’s proverbial cheeks.
At the beginning of the second quarter of August, daily active users increased 44% and paid subscriptions increased 71% compared to the year-ago period. As a result, revenue grew 50% and free cash flow jumped to $9.9 million from $2.1 million. In short, the company attracts multiple users and paying customers, which also adds up to huge advantages in the sales and earnings balance.
Of particular interest is that Duolingo’s management never mentioned the word “inflation” in its second-quarter report and earnings release. The issue facing this company’s stock isn’t the only issue worth paying attention to. If anything, Duolingo’s stock should go up in 2022.
But that’s not how market makers approach stocks these days, so we had to settle for a month of strong stability instead. Stocks are far from cheap, but there seems to be a disconnect between the company’s tremendous business growth and the stock charts. Therefore, Duolingo seems like a chance purchase at the moment.
Anders Bylund owns Duolingo, Inc. Holdings in The Motley Fool does not have a position in any of the stocks mentioned. The Motley Fool has a disclosure policy.