The analyst notes that Duolingo's emphasis on gamification to drive engagement and payer conversion makes the business more akin to dating and gaming assets. The company is moving away from the EdTech business, which bears challenges due to ChatGPT.

Based on Apptopia data, Duolingo has a >10x lead in app downloads over rival language apps like Babbel. 

Patterson notes that more users are actively engaged with the Duolingo app. 

The analyst plotted relative search queries for popular freemium apps from 2010-2023, where he noted that DUOL has now surpassed Candy Crush (which admittedly peaked years earlier) and is trending closer to Tinder.

For each 1% of Duolingo's subscribers that adopt Max, the analyst estimates a ~1% lift to 2024E revenue projections. 

The analyst is cautious about how quickly Max rolls out, whether additional features are included, and whether pricing changes from current levels. 

For 2Q, the analyst expects revenues to be $123.5 million, while FY23 revenues are expected to be $504.9 million.

Price Action: DUOL shares are trading higher by 3% to $139.31 on the last check Monday.