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from the world of economics and financeShares of Duolingo (NASDAQ: DUOL) took a dive like a wounded green owl on Thursday. The language-learning expert posted strong first-quarter results on Wednesday evening, but some investors wanted a stronger user-growth story, and others simply cashed in some paper profits.
The stock fell as much as 21.4% just after the opening bell today, firming up at a 17% price drop around 2 p.m. ET.
In the first quarter of 2024, Duolingo's revenue jumped 44.9% year over year to $167.6 million. On the bottom line, the year-ago period's net loss of $0.06 per diluted share swung to $0.57 of positive earnings per share.
Your average Wall Street analyst would have settled for earnings of roughly $0.27 per share on sales near $165.6 million. Moreover, management raised its full-year guidance for revenue, subscription-style order bookings, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
A statement from the company said, "We're excited about our near-term opportunities, which remain consistent: user growth, optimized subscription conversion and tiers, and family plan."
So Duolingo's business is doing great, but the shares still crashed. There are two reasons for this confusing state of affairs:
I don't think that Duolingo's days of high-octane growth are over, though. The growth in users has wobbled both up and down over the last year, but always in that sweet pocket between 55% and 65%. The stock isn't cheap at 209 times earnings and 57 times cash flows, but positive profit metrics are relatively rare for companies in this stage of explosive business growth -- and I'm still a buyer of Duolingo stock.
Now excuse me, I think it's time for a quick Spanish lesson. ¡Hasta luego, amigo!
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Anders Bylund has positions in Duolingo. The Motley Fool has positions in and recommends Duolingo. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.