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Investors get the chance to buy Duolingo stock at the IPO price via Robinhood starting today. All you need to do is request shares via the Robinhood app for a chance to be randomly selected to receive the shares.
This is part of Robinhood's new IPO Access feature, giving retail investors rare access to IPO stocks they would not have had before.
And you will probably want to throw your name in the hat for Duolingo stock.
The first (and most recent) IPO stock to go through Robinhood is up more than 100% since the offering. Figs Inc. (NYSE FIGS) went from a $22 IPO price to $47 today.
Normally, retail investors would have to wait for the stock to hit the exchange, which often meant the stock price would already be inflated once institutional demand pumped the price.
Now, the playing field is a tad more level, and a Duolingo IPO is just the kind of event Robinhood IPO Access was made for.
Duolingo filed its prospectus with the U.S. Securities and Exchange Commission on Monday, June 28. It will trade on the Nasdaq under the ticker DUOL.
Let's talk about why Robinhood investors should be all over this one today.
What Is Duolingo?
Duolingo offers language-learning tools via a website and mobile app. Founded in 2009, the American company offers 106 courses in 38 languages and now has over 300 million registered users.
Luis von Ahn, a Carnegie Melon Professor, started the project, inspired by his Guatemalan upbringing. He noticed what it cost people in his community to learn English in the United States and set off to provide a more affordable, efficient solution.
He created this freemium-model language tool. Now, over 2,000 universities worldwide accept language certifications from Duolingo. The company also offers "Duolingo for Schools" to assist language teachers in the classroom.
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Ahn's partner and former student, Severin Hacker, currently presides as CTO of the company. The two launched a private beta version of their app in 2011 that reached 300,000 people. Their product went fully public on iOS and Android in 2012.
The app functions like a video game where users earn rewards for progress in the game, such as badges and "gems" that can go toward further customizing a character they create. Friends can also compete against each other on public leaderboards ranked by experience points.
Duolingo Plus, the paid version, gives users additional progress quizzes and other perks, along with an ad-free experience.
Is Duolingo Profitable?
Like many companies at this stage, Duolingo is not yet profitable. In fact, its loss margin increased significantly in the last year, now $13.5 million.
You can usually justify a widening loss margin by pointing out how the company is spending on growth worldwide. And this is true for Duolingo. The company has scaled incredibly fast over the last decade.
Plus, revenue is increasing and will inevitably catch up to the company's spending over time.
Despite running at a loss, Duolingo brought in $161.7 million in revenue in 2020. The company made over $55 million in a single quarter, which was closer to the annual revenue of the previous year. Annually, revenue was up 129%.
Duolingo has come a long way, fast. Sales went from $1 million in 2016 to $13 million in 2017. And now, they've breached the $100-millions.
Its freemium model relies on ads and in-app purchases like any other. But there's something genius in its innovation process that sets it apart.
The company uses community volunteers to innovate and develop new language courses - for free - via its platform, Duolingo Incubator. This is a great way to crowdsource the best educational content for its audience without hiring a salaried educator to design courses.
It will also play an important role in cutting the company's losses down the road.
Is Duolingo Stock a Buy?
Pricing information for Duolingo stock is yet to be made available. But we know it plans to sell $100 million worth of shares whenever the IPO date arrives.
This whole Robinhood IPO Access thing is still very fresh for retail investors, so there will no doubt be a rush for shares of Duolingo.
But even in terms of fundamentals, this one is kind of a no-brainer. Language learning will not go out of style for a long, long time. It's something of an immutable trend. And whoever makes it the most easy, fast, and cheap solution around will win the market.
That's Duolingo. Its app has over 500 million downloads and counting.
Additionally, its cost-cutting business model demonstrates a unique savvy in the front office. Even while losses increase, it knows what it is doing and will more than likely cross into profitability once it has reached its growth goals.
Finally, Figs is the only other stock that Robinhood has offered through IPO Access. That stock is up to $47 today. That means investors who got IPO shares at $22 have made 113% profit so far.
Clearly, Robinhood is offering more than clunky throwaway IPO stocks. Duolingo is a sure buy if you can manage to get shares.
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About the Author
Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.