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

We came across a bullish thesis on Duolingo, Inc. on wallstreetbets subreddit by Significant_Papaya28. In this article, we will summarize the bulls’ thesis on DUOL. Duolingo, Inc.'s share was trading at $191.41 as of November 28th. DUOL’s trailing and forward P/E were 24.11 and 47.17 respectively according to Yahoo Finance.

Duolingo (DUOL), the language learning app widely recognized by its iconic green owl, is presenting a compelling contrarian investment opportunity as its stock has fallen sharply from $542. Market fears of competition from OpenAI and Google, coupled with public misperception around Duolingo’s adoption of AI, have driven a narrative that the company’s growth is at risk. Despite these concerns, Duolingo’s fundamentals remain strong.

The company continues to grow revenues and free cash flow at a robust pace, with Q2 2025 revenue up 41% YoY to $252.3 million and free cash flow rising 61% YoY to $86.3 million. Subscription growth is particularly notable, up 46% YoY, reflecting strong engagement and a loyal user base now exceeding 128 million monthly active users.

While Duolingo lacks a traditional moat, its global brand recognition and superior user experience function as a de facto competitive advantage, similar to what Spotify and Netflix have achieved in their respective markets. The company’s subscription-based model, augmented by advertising revenue, is highly scalable and now expanding beyond language learning into music, math, chess, and other educational content, further enhancing the platform’s value proposition. AI integration accelerates course creation, enabling rapid content expansion while maintaining low operational friction and minimal regulatory exposure.

Valuation metrics have corrected from extreme levels, with the P/E now at 122 and price-to-sales at 15x, yet growth remains strong, averaging 40% YoY historically. Forward guidance projects approximately 35% growth, suggesting the market is pricing in overly pessimistic assumptions. If the company continues executing and leveraging AI to expand its educational ecosystem, Duolingo’s stock could see significant upside, offering a high-risk, high-reward opportunity for investors willing to take a contrarian position.

Previously we covered a bullish thesis on Duolingo, Inc. (DUOL) by Lorenzo Bastianelli in May 2025, which highlighted the company’s Q1 growth driven by viral marketing, AI-enhanced courses, rising engagement, and paid subscriber expansion. The company's stock price has depreciated approximately by 61.98% since our coverage. The thesis still stands as Duolingo continues expanding content. Significant_Papaya28 shares a similar perspective but emphasizes the decline as a buying opportunity based on strong fundamentals.

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.