Needham Sees Potential In Duolingo To Spearhead $115B Language Learning Market

  • Needham analyst Ryan MacDonald initiated coverage on Duolingo, Inc DUOL with a Buy rating and a price target of $115.
  • MacDonald acknowledges that DUOL is a leader in the language learning market, which HolonIQ sizes at $49 billion and set to reach $115 billion by 2025 and notes it is only 34% digital.
  • His survey shows that DUOL has built industry-leading brand recognition with a gamified learning platform that draws learners in and generates more robust engagement than similar businesses in ed-tech. 
  • The healthy engagement creates multiple monetization opportunities for DUOL via subscriptions, advertising, and in-app purchases. 
  • MacDonald thinks the company will tap these growth channels to generate "Rule of 40"-type fundamentals over the next 3-5 years. 
  • Paid subscribers account for only 6% of MAUs, representing a meaningful opportunity for conversion. The company's latest family plan is a second lever to keep the company's annual subscription revenue growth above 30%.
  • He expects the company's Duolingo English Test to power market share gains and for DUOL to augment its growth by expanding its platform to literacy & math.
  • Price Action: DUOL shares traded higher by 2.70% at $99.57 on the last check Thursday.
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