When Can We Expect A Profit From Duolingo, Inc. (NASDAQ:DUOL)?
We feel now is a pretty good time to analyse Duolingo, Inc.'s (NASDAQ:DUOL) business as it appears the company may be on the cusp of a considerable accomplishment. Duolingo, Inc. operates as a mobile learning platform in the United States, China, the United Kingdom, and internationally. The US$6.8b market-cap company posted a loss in its most recent financial year of US$60m and a latest trailing-twelve-month loss of US$31m shrinking the gap between loss and breakeven. The most pressing concern for investors is Duolingo's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
Check out our latest analysis for Duolingo
Consensus from 9 of the American Consumer Services analysts is that Duolingo is on the verge of breakeven. They anticipate the company to incur a final loss in 2023, before generating positive profits of US$3.7m in 2024. So, the company is predicted to breakeven just over a year from now. How fast will the company have to grow each year in order to reach the breakeven point by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 122% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Underlying developments driving Duolingo's growth isn’t the focus of this broad overview, however, bear in mind that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one aspect worth mentioning. Duolingo currently has no debt on its balance sheet, which is rare for a loss-making growth company, which usually has a high level of debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on Duolingo, so if you are interested in understanding the company at a deeper level, take a look at Duolingo's company page on Simply Wall St. We've also put together a list of key factors you should further research:
Valuation: What is Duolingo worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Duolingo is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Duolingo’s board and the CEO’s background.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
