What Happened:
Shares of language-learning app Duolingo (NASDAQ:DUOL) jumped 23.3% in the pre-market session after the company reported fourth-quarter results and delivered robust user and revenue growth, leading to a nice beat on bookings. DAU growth accelerated for the 10th quarter in a row to 65% year on year in Q4, while the ratio of DAUs to MAUs improved to 30%, which highlights that engagement is improving. The top line also benefitted from strengths in the company's family plan offering and better-than-expected performance in New Year promotions. Bottom line metrics also came in strong, with adjusted EBITDA, free cash flow, and EPS exceeding expectations, demonstrating the company's ability to balance growth and profitability. Lastly, guidance for the next quarter and the full year were ahead of expectations for both revenue and adjusted EBITDA. Zooming out, this was a great quarter that shareholders will appreciate.
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What is the market telling us:
Duolingo's shares are somewhat volatile and over the last year have had 26 moves greater than 5%. But moves this big are very rare even for Duolingo and that is indicating to us that this news had a significant impact on the market's perception of the business.
Duolingo is up 6.4% since the beginning of the year, and at $227.70 per share it is trading close to its 52-week high of $241.21 from December 2023. Investors who bought $1,000 worth of Duolingo's shares at the IPO in July 2021 would now be looking at an investment worth $1,640.
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