Duolingo, Inc. (DUOL): A Bull Case Theory

We came across a bullish thesis on Duolingo, Inc. on Value investing subreddit by Rich_Minimum_2888. In this article, we will summarize the bulls’ thesis on DUOL. Duolingo, Inc.'s share was trading at $271.18 as of September 5^th. DUOL’s trailing and forward P/E were 111.14 and 60.24 respectively according to Yahoo Finance.

Duolingo has built a powerful digital learning ecosystem that mirrors Charlie Munger’s “latticework of mental models,” layering psychological and behavioral levers to create what he calls a lollapalooza effect. The app’s central mechanism, the streak, exploits loss aversion, making users more motivated by avoiding streak loss than by gaining progress. Duo the Owl, the app’s mascot, reinforces this through subtle guilt, transforming healthy learning habits into compulsive engagement.

Users often pay to preserve streaks, illustrating the overjustification effect, where extrinsic rewards override intrinsic motivation. Beyond streaks, Duolingo taps into self-improvement biases, social proof via leaderboards and memes, authority through the Duolingo English Test, and operant conditioning with badges and gamified feedback, making continued engagement habitual and hard to quit.

AI has further amplified Duolingo’s moat. It accelerates content creation, enabling hundreds of courses in a single year, while real-time feedback from 100M+ users ensures rapid validation and iteration. AI-driven tutors like Lily overcome conversational barriers, offering judgment-free practice, and adaptive personalization tailors lessons to individual skill levels, keeping motivation high and churn low. Peer-reviewed studies in 2025 confirm that AI features measurably improve learner confidence in grammar, speaking, and practical use.

Duolingo’s scale, experimentation, and cultural resonance solidify its competitive advantage. Over 100M active learners generate data that refine the platform continuously, while over 16,000 A/B tests ensure optimal feature performance. Its brand and meme power drive virality, and the English Test’s acceptance at 5,000+ universities adds authority. With a global language-learning market of two billion users and expansion into new subjects, Duolingo remains far from saturating its total addressable market, making it a uniquely compelling investment in digital education.

Previously we covered a bullish thesis on Duolingo, Inc. (DUOL) by Lorenzo Bastianelli in May 2025, which highlighted the viral “Dead Duo” campaign, strong Q1 revenue growth, AI-driven content scaling, and expansion into new educational verticals. The company's stock price has depreciated approximately by 46.14% since our coverage. The thesis still stands as Duolingo’s AI and engagement flywheel support long-term growth. Rich_Minimum_2888 shares a similar approach but emphasizes behavioral levers like loss aversion, streaks, and the lollapalooza effect driving user engagement.

Duolingo, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 55 hedge fund portfolios held DUOL at the end of the second quarter which was 51 in the previous quarter. While we acknowledge the potential of DUOL as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.