Shares of top-ranked online language learning site Duolingo went for a wild ride after it launched its IPO in mid-2021. On a weekly chart it formed a long IPO base. It topped a buy point last fall, surging 21% on Nov. 9 in 400% of its usual volume. It uses AI to make its lessons fun and its stock has soared.
On Friday, the Relative Strength (RS) Rating for Duolingo jumped into the 90-plus percentile to 90. It surged up from 80 the day before, topping an important milestone.
Duolingo Among Top 10% For Stock Performance
The 90 RS Rating shows that Duolingo tops 90% of stocks for price performance this past year. Decades of market research reveals that stocks that go on to make the biggest gains typically have an 80 or better RS Rating as they launch their largest runs.
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Among its other key ratings Duolingo boasts a best-possible 99 Composite Rating. It earns an OK 81 Earnings Per Share Rating, largely due to poor performance in its early post-IPO days. Look for that to improve based on recent results. Its B- Accumulation/Distribution Rating shows that mutual funds, ETFs and the like are moderately heavy buyers.
In terms of fundamentals, Duolingo reversed from an 8-cent loss in the quarter ended March 31, 2023, to a 121% profit gain the following quarter. In the two most recent quarters its EPS rose 115% and an aggressive 174% last quarter, reversing from a 35-cent loss the same quarter a year earlier to a 26-cent profit.
Revenue growth for the young company has been robust too, growing 42%, 44%, 43% and 45% last quarter to $151 million.
Duolingo uses artificial intelligence animated characters, including its namesake owl, Duo, to interact with language learners. It offers personalized lessons in a variety of spoken and written formats. Additionally, it awards points and students progress through various levels to the "Diamond" league where they can compete with other advanced students.
The Owl Plummets, Then Soars
After surging out of the gate in mid-2021 Duolingo dropped to a 60.50 low in May 2022. From there it shot up, and its fast sales and profit growth made it a darling on Wall Street. It hit an all-time high at 245.87 last Dec. 19. It's consolidated recently in sync with the market pullback. Friday afternoon it traded just above 200. See if the stock is able to form a fresh base and break out.
Duolingo says on its website it plans to announce its first quarter earnings results the morning of May 8.
Duolingo earns the No. 1 rank among its peers in the Computer Software-Education industry group. VirTra and Spotify Technology are also among the group's highest-rated stocks.
IBD's unique Relative Strength Rating measures technical performance by using a 1 (worst) to 99 (best) score that indicates how a stock's price action over the trailing 52 weeks matches up against all other stocks in our database.
Please follow James DeTar on X, formerly known as Twitter, @JimDeTar
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