DUOL - Pulling Back the Curtain: Catching Up with Duolingo Management | Key Takeaways From Investor Call

Research evidence excerpt

DUOL - Pulling Back the Curtain: Catching Up with Duolingo Management | Key Takeaways From Investor Call

towards user growth vs. monetization will likely be a long-term story in which

investors will need to see reasonable proof points of success before getting constructive. The company is targeting 100M daily active users

by 2028, and we believe achieving that target could position DUOL for meaningful success over the long term. We view the company's

market-leading position and ability to keep users engaged as significant competitive advantages. In our view, Duolingo's ability to gamify

learning is a significant differentiator in the education market that has helped attract new users, keep existing users active, and has

translated to success even across new courses such as Math, Music, and Chess. We believe Duolingo's strength in engaging users will

help it sustain its strong user growth and to better monetize its users over time - with new courses also serving as a significant growth

lever that could provide new monetization channels over time. We also continue to see significant runway in Duolingo's core language-

learning courses with the company exceeding 100M monthly active users compared to over 2B people globally looking to learn a new

lesson. We view AI as a potential friend and foe to DUOL - with potential to accelerate innovation and product development internally,

while also presenting a potential threat to subscriptions/pricing and long-term TAM.

Valuation and Risks

Our price target of $100 is based on a 13x EV/EBITDA multiple on our FY26 estimates. We believe that our multiple assumption is justified

as we expect near-term headwinds to Duolingo's model as a result of its strategic shift to focus on user growth rather than monetization.