Unfortunately though, there’s one growth stock that has been bathed in a sea of red for months now. And adding injury to insult, it crashed another 20% yesterday (27 February).

Needless to say, it’s testing my patience. So, should I banish this utter stinker from my portfolio?

Green owl disaster

I’m talking about Duolingo (NASDAQ:DUOL), the digital education app with 85% share of the online language learning market.

Last year, the firm ran a viral social media campaign centred around the supposed death of its green owl mascot, Duo. Perhaps it might do a new one about its own stock, which has crashed 75% inside 12 months. ‘Ouch’ doesn’t do it justice.

AI has weighed on sentiment, as the rapidly improving technology could one day enable a start-up to ‘vibe-code’ a new Duolingo/Spotify/Rightmove/Auto Trader (insert popular consumer platform).

But the firm certainly hasn’t helped itself, with CEO Luis von Ahn sending a poorly worded internal memo last year saying Duolingo would become an AI-first company. This caused a backlash, with some users unhappy with the suggestion that AI would replace humans for translation and content generation.

It’s a case study in how leaning too hard into AI can alienate a loyal fanbase.

On Thursday (26 February), management was alienating shareholders with shocking guidance. For 2026, it expects much lower revenue, bookings, profits, and margins.

von Ahn said: “In 2026, we are deliberately prioritising user growth and teaching better. We’ll focus on improving the free learner experience to grow word of mouth and feed our next user growth engines like chess, math and music, even though that moderates near-term financial growth.”

Moderate? You can say that again. In 2024, bookings growth was 40%. Now, management’s guiding for about 11% growth in 2026.

Glimmers

Duolingo admitted that extra friction it introduced — more ads and upsells — to drive subscriptions has led to a deceleration in daily active users (DAUs). So it will sacrifice short-term profits to improve the free user experience to reaccelerate DAU growth.

There were glimmers of hope. The new chess course has 7m DAUs inside a year. And Duolingo expects its strategy to pay off by reaching 100m DAUs by 2028. If achieved, it would result in a far larger company.

Management expects 20% DAU growth in 2026. Part of this will involve giving AI-driven speaking tools to free users and mid-tier subscribers. It can now do this because AI inference costs have fallen tenfold, and keep falling.

Finally, a $400m share buyback programme was announced, as well as higher-margin targeted ads, potentially in the foreign language someone is learning.

Pull the plug?

Fortunately Duolingo wasn’t one of my largest holdings before this week (and is much smaller now). But as the saying attributed to British economist John Maynard Keynes goes: “When the facts change, I change my mind.”

I got this one wrong.

DIY pensions like SIPPs allow enough time for a potential recovery, so I’m not selling. But due to a loss of faith in management’s ability to create shareholder value, I won’t buy anymore.

The post The biggest stinker in my SIPP crashed (again) this week — what should I do? appeared first on The Motley Fool UK.

Nevertheless, I continue to add money to my portfolio when I can as I aim to build long-term wealth. I bought four stocks recently, including Ferrari and LondonMetric Property.

Here are the other two, which I think are worth considering today.

SaaS Apocalypse

Sage Group (LSE:SGE) has been caught up in the historic sell-off in the software sector (dubbed the ‘SaaS Apocalypse’). The FTSE 100 stock is down 40% in just over a year!

Sage provides accounting software for millions of small and medium-sized enterprises (SMEs). The market fear is that powerful new AI models will end up eating the company’s lunch.

However, entire finance teams are trained on Sage. Switching to a new AI platform might require re-training every employee, which many SMEs probably won’t risk doing. 

Moreover, Sage has its own Copilot generative AI assistant that does similar things (automating invoices, chasing payments, spotting errors, etc). But crucially, it does these inside the trusted environment where the customer’s data already lives. 

CEO Steve Hare called the notion that AI agents means nobody needs accountants anymore “completely ludicrous“.

After plummeting 25% year to date, the stock is trading at just 14.5 times fiscal 2027’s forecast earnings. For a quality tech company still growing profits by double digits, that looks far too low to me.

There’s also a well-covered forecast dividend yield of 3.2%.

Down 73%

The second stock I bought was language learning leader Duolingo (NASDAQ:DUOL). Down 73% in a year, this has also been put in the skip lately due to AI fears.

The news that sent the stock down 12% this week was T-Mobile launching a tool that allows users to translate phone calls in real-time.

To borrow Sage CEO’s language, this latest sell-off appears ludicrous. Duolingo is an AI-powered learning app, not a translation tool. Most of its 11.5m paid users are learning a language to get a job, study abroad, integrate into a culture, or simply for fun.

AI enhances the user experience rather than destroys the business model. We haven’t got Q4 earnings yet but Duolingo says daily active users grew roughly 30%, despite the existing threat from Google Translate and ChatGPT.

Q4 bookings might even be slightly above the high end of previously announced guidance of $329.5m to $335.5m. That would represent growth of roughly 23%, despite the firm currently prioritising long-term user growth over short-term bookings/profits.

Going off 2026’s forecast, the enterprise value-to-free-cash-flow (EV/FCF) ratio is now around eight, down from 61 in 2023. So the market basically thinks this growing business is toast, which I’m betting is not the case.

Foolish takeaway

Of course, I might be wrong about these two stocks. Perhaps Sage will lose customers to new AI tools, limiting its pricing power.

Meanwhile, Duolingo’s user base may dwindle as people stop learning languages and instead rely on live translation tools. I accept both Sage and Duolingo could head lower as more powerful AI models are released.

Yet I believe that this tech/software crash is creating lucrative buying opportunities, especially as the fear spreads to other areas of the stock market.

The post Down 73%! 2 moves I just made in my Stocks and Shares ISA appeared first on The Motley Fool UK.

After opening at $141, it lost 50% of its value through the beginning of 2023, before surging 630% to a peak of $544 by May 2025. Since then, it has crashed 73% and is now back where it started at $142.

I bought shares of the language learning firm three times in 2025. And my holding is now deep underwater with a loss of 50%.

¡Qué desastre!

Is Duolingo now doomed in my Stocks and Shares ISA?

Checklist

When I first explored Duolingo, I wasn’t convinced. I feared this was just a buzzy, gamified language learning app that could easily be replicated.

Just because an app is popular, it doesn’t mean that translates (pun intended) into a good investment (see Snap or Pinterest). I worried that Duolingo had no durable moat.

However, one by one, it started ticking off boxes on my growth stock checklist. Below, I’ve listed some of them.

On top of this, I look for something strange or distinctive in my growth companies (a certain je ne sais quoi, as it were). The company ticks this box with its bizarre Duo owl mascot and quirky social media campaigns.

Von Ahn describes the firm’s culture as “wholesome but unhinged”.  

What’s gone wrong?

The company’s latest results for Q3 2025 were solid. Revenue jumped 41% to $271.7m, while the adjusted EBITDA margin expanded to 29.5% from 24.7% the year before. Paid subscribers increased 34% to 11.5m, with Asia now the firm’s fastest-growing region.

However, two things have spooked the market. One is that the firm is going to focus on “making the free version the best it’s ever been…A great free product drives word of mouth and, ultimately, subscriptions“.

Wall Street hates it when companies sacrifice near-term profits to drive long-term growth. The stock cratered 25% after the Q3 results.

In 2005, Amazon stock also crashed when CEO Jeff Bezos announced an “all-you-can-eat express shipping” service (aka Amazon Prime). Wall Street loathed this “charity project“, but it ultimately strengthened Amazon’s competitive position.

I think Duolingo’s move to improve the app’s teaching quality will eventually result in more subscriptions, which will drive earnings growth. But a slowdown in bookings obviously adds near-term uncertainty.

A second concern is a general one about AI disrupting entire software/technology categories. In Duolingo’s case, some investors fear learners will switch to ChatGPT and other free AI apps.

While this is a theoretical risk, it hasn’t happened yet, nor has a rival language app been knocked up in a week with AI-generated code. Besides, it would have to encourage habit formation to stop learners quitting, which is what Duolingo has mastered.

Personally, I think the AI threat is massively overblown. But only time will tell.

Doomed Duolingo?

Duolingo is back at its IPO price despite growing revenue nearly four times and the number of paid subscribers almost five times since 2021. Even CNBC’s Jim Cramer, who doesn’t rate Duolingo’s prospects, now thinks the stock is “oversold“.

So there’s now a stark mismatch between the share price and underlying fundamentals. As such, I won’t be selling my shares, and I still think the stock’s worth considering as part of a diversified ISA.

The post Down 50%, is this growth stock in my ISA doomed? appeared first on The Motley Fool UK.

And yet it could be one of the biggest losers from the artificial intelligence (AI) revolution. According to research undertaken by Microsoft, interpreters and translators are the most vulnerable. Apparently, there’s a 98% overlap with AI and their roles. If fewer people are going to have a career as a linguist, it stands to reason that Duolingo’s going to suffer. Or does it?

A double-edged sword

The company claims that 1.2bn people are currently learning a language. It says “the majority are doing so to gain access to better opportunities”. This includes those looking to travel between countries — either on a permanent or a temporary basis – as well as some individuals who enjoy learning for its own sake.

Not surprisingly, the company’s business model seeks to appeal to as many of these people as possible. It involves providing “free language education” with “no hidden fees [and] no premium content”. However, the company isn’t a charity. It has an obligation to its shareholders to be profitable.

One of the ways in which it achieves this is by selling advertising space and charging users to remove these adverts.

It also charges for its AI-based ‘Duolingo Max’ offering. As well as providing extra insights when users get things wrong, it offers a roleplay function where learners can interact with characters on the company’s app. In addition, conversational skills can be practised via a video call feature with Lily.

The group’s also using AI to cut costs, although it hasn’t been easy. As if to prove Microsoft’s prediction right, earlier this year, Duolingo unveiled plans to cut headcount and become an “AI-first company”. But there was such an outcry that it had to temporarily close down its social media accounts.

The group’s share price is now (18 November) trading at 67% below its 52-week high. However, the company’s chief executive recently said: “We are one of the few… that has found a way to make profit off of AI.”

This could explain why so many Trading 212 users are keen on the stock.

Some numbers

During the third quarter of 2025, the group disclosed that it had 11.5m paid subscribers out of a total of 135.3m monthly active users. With only 8.5% of its customers prepared to pay for its services, there’s plenty of scope to generate more revenue. And like most software businesses, it’s able to command a healthy gross profit margin. It was 72.5% during the quarter.

Analysts are expecting earnings per share of $3.32 for 2025. But this is where I have a problem. The stock’s currently trading on a multiple of 53 times forecast earnings.

This looks expensive to me. And the 43% fall in its share price over the past month isn’t a good look. It suggests there’s less enthusiasm for the stock than might be indicated by recent activity on the Trading 212 platform.

In my opinion, there are plenty of other US stocks to consider offering better value at the moment, including ones operating in industries with less uncertain futures.

The post Why are investors on this trading platform piling in to an AI-threatened US stock? appeared first on The Motley Fool UK.

However, the most disappointing by far has been Duolingo (NASDAQ:DUOL). Since I invested, my total paper loss is now around 50%. Ouch!

Sticky platforms

Whenever a stock collapses like this, it’s important to revisit the original investment thesis. If this is broken, it’s better to face up to reality because the stock may keep falling and never recover.

When I first explored Duolingo, I was sceptical the language learning app had any durable competitive advantage (moat). Yet it quickly reminded me of Netflix (NASDAQ:NFLX). Both are scalable, global consumer platforms monetised by subscriptions (mainly) and adverts.

As with Duolingo today, it wasn’t obvious back in 2009 that Netflix had a durable moat. Its streaming model could easily be replicated, and indeed has been since by the likes of Amazon, Apple, Disney, Paramount, and ITV. Ever more competition is a risk to growth.

Yet Netflix has endured because of its brand power, popular shows, and sophisticated AI/algorithms used to recommend content.

Likewise, Duolingo has a strong brand, highly engaged user base, and strong AI credentials. Its Birdbrain AI system processes over 1.25bn daily exercises, helping feed machine-learning models that personalise users’ learning experiences.

Crucially, both also have distinct corporate cultures focused on long-term value creation over short-term profits.

Our long-term goals remain unchanged: To be a great Internet movie service…and to grow subscribers and earnings every year while
continuing to invest in streaming.

Netflix CEO Reed Hastings, 2009 annual report.

One of our five operating principles is ‘take the long view’. The opportunity ahead of us is to teach billions of people, and while we’ve made incredible progress, we know we’re early in our journey.

Duolingo CEO Luis von Ahn, 2025.

Broken thesis?

Looking at Duolingo’s Q3 results, I see no evidence the growth story’s unravelling. Daily active users hit a record 50.5m while monthly users topped 135m.

Revenue jumped 41% year on year to $271.7m and adjusted EBITDA surged 68% to $80m.

Looking ahead though, management will shift focus from increasing paid subscribers (monetisation) to improving teaching quality to drive long-term user growth. And this risks some margin pressure and, possibly, lower-than-expected bookings.

Being realistic

Now to be clear, I’m not saying Duolingo will become a global juggernaut worth $480bn like Netflix. The streaming leader’s shares are up roughly 14,000% since 2009, and such returns are exceptionally rare. Hence why I said it only reminds me of a young Netflix.

Also, I don’t want to downplay AI threats or live translation from Google and Meta glasses. Although it’s worth remembering that people use Duolingo regularly to learn a second language, not translate conversations.

Meanwhile, ChatGPT has no structured curriculum and/or gamified features like streaks to keep users engaged.

Of Duolingo’s 135m users, only 9% (11.5m) today are paid subscribers. Considering there are 1.5bn people learning a foreign language, the market opportunity remains massive, especially in Asia. And this excludes maths, music, chess and other future subjects.

With the stock trading at a far cheaper valuation than six months ago, I think it’s worth assessing. I think the crashing share price doesn’t reflect the actual strength of the underlying business.

The post This growth stock down 50% reminds me of Netflix in 2009 appeared first on The Motley Fool UK.

Not every stock that’s down is an opportunity. But some of them are, and I think there’s a real chance for investors who can figure out the difference. 

Falling knives

AI is clearly changing a lot for companies in the tech sector. And in a lot of cases, it’s making share prices go down as investors see threats to what looked like promising companies. 

One example is Duolingo (NASDAQ:DUOL). The stock is down 66% in the last six months, because investors are concerned about the threat of AI-enabled competitors.

The firm doesn’t look like going bust. But the stock was trading at a price-to-earnings (P/E) ratio of 268 a year ago, which implies huge growth that now looks less likely to materialise.

At a P/E ratio of 23, the stock looks more reasonable, but a discounted share price isn’t always an opportunity. Investors who need reminding can look at Peloton‘s performance over the last five years.

In other words, piling into stocks just because they’re down isn’t always a good plan. In a lot of cases, they’ve been falling because there’s a real chance their growth prospects are lower. 

This, however, isn’t always the case. The market is well capable of overestimating the threats a company is facing and when it does, there can be outstanding opportunities for investors.

Opportunities

Interestingly, I think some of the most attractive growth opportunities right now might be closer to home. FTSE 250 housebuilder Vistry (LSE:VTY) is one example.

After a series of profit warnings connected with internal costing errors, the stock is down 55% from where it was 15 months ago. But things should be starting to look up for the company.

The accountancy issues are likely to impact profits, but the effect should wear off by the end of 2026. And I’m not convinced this is being reflected in the share price.

Vistry has a different business model from most housebuilders. Rather than building by itself, it works with partners such as local authorities and housing associations. 

The risk with this is that it involves extra relationships that can potentially become strained. But the advantage is that it makes the company much more efficient than other builders.

With the effects of the recent problems starting to wear off, but the stock still some way from where it was, I think this is an opportunity. That’s why I’ve been adding to my investment.

Being brave

It takes courage to buy a stock that has been falling sharply. It’s a sign investors think there’s a problem with the underlying business and there’s rarely smoke without fire.

Sometimes, though, the fire isn’t as bad as the market thinks it is. In those situations, investors who know what they’re looking for can find outstanding opportunities. 

There’s always a risk of catching the next Peloton. But while Vistry has had big problems recently, I think these are coming to an end and this makes the share price a bargain.

The post It takes nerves of steel to buy growth stocks right now! Here’s what I’m doing appeared first on The Motley Fool UK.

Looking ahead, though, I still think they could turn out to be good investments, if I’m patient. Both are still growing nicely.

Big ambitions

The growth stocks in question are cross-border payments provider Wise (LSE:WISE) and ed-tech firm Duolingo (NASDAQ:DUOL). Wise is down slightly since I first invested a few months ago, while Duolingo has crashed more than 50%.

So, what problem(s) are these companies trying to solve? Why do they exist?

Let’s start with Wise. It says that for people and businesses worldwide, “moving and managing money internationally remains expensive, slow, inconvenient and opaque“. To address this, the firm wants to make this process far cheaper, quicker, and more transparent.

The market opportunity that comes with solving this problem is massive, estimated at roughly £32trn. And today, Wise has just 5% and less than 1% share, respectively, of the growing personal and business cross-border payments markets.

In the six months to 30 September, Wise customers moved £84.9bn, a year-on-year increase of 24%. However, the company wants to eventually move trillions worldwide rather than billions.

As for Duolingo, which is known for language learning, it believes that AI will radically transform education. Using this technology, it aims for its app to be as good as a human tutor, but also much cheaper (free for most) and far more engaging. 

In Q3, Duolingo’s daily active users topped 50m for the first time. Monthly active users hit 135.3m, while paid subscribers rose 34% to 11.5m. Long term, the company aims to have 1bn+ users and many subjects (it currently offers maths, music, chess, and 40 languages).

Looking long term

Both firms are investing to capture huge market opportunities ahead. In general, analysts don’t like this (they’re more short-term focused). So this strategic focus on growth over profit maximisation is a near-term risk to both.

In H1, Wise’s underlying income grew 13% to £749.5m, but underlying pre-tax profit fell 17% to £122m. This was due to an increase in investments in infrastructure and 1,000+ new hires to support growth.

However, management says the full-year underlying pre-tax profit margin will still be around 16%, at the top of its mid-term target of 13%-16%. So this doesn’t worry me, especially as the firm’s solid operational progress continues.

Wise is now integrated into the local payment infrastructure of Brazil, and soon Japan, and has secured regulatory approvals to launch its products in the UAE.

As Wise continues to lower its take-rate, it looks likely to capture more market share, especially in the large business segment. Incredibly, 74% of transfers are now completed instantly.  

Meanwhile, Duolingo has announced it will shift focus from monetisation (converting free users to paying subscribers) back to user growth. This may hurt bookings in 2026.

So far, these stocks have been bad picks for me, especially Duolingo. But according to Grand View Research, the global digital education market is projected to reach $133.7bn by 2030, growing at a compound annual rate of 31.5%. 

In my view, both these growth stocks are still worth considering. Their long-term potential looks underappreciated, and I think my patience will reward me over time.

The post 2 growth stocks I’m backing to grow my ISA by 2030  appeared first on The Motley Fool UK.

The problem is artificial intelligence (AI). Management keeps trying to present this as an opportunity, but the stock market – literally – isn’t buying it, and nor am I.

Strong earnings

Duolingo’s revenues were up 41% and earnings per share were up 682%, though this was largely due to a one-off tax gain. And there’s nothing wrong with either of those numbers.

Bookings for Q4 were a little bit light and the number of daily active users was slightly below expectations. But neither of those justifies a 21% decline in the share price.

The big issue is that AI is creating new competitors for a lot of software companies. And every time Duolingo’s management talks about this, I get more and more concerned.

CEO Luis von Ahn stated that the firm is one of the few businesses to actually make money from AI. But as impressive as that is, I’m sceptical of the forward prospects for this.

AI friend or foe?

Every time Duolingo talks about its AI strengths, I get more and more worried for its shareholders. Back in April, von Ahn said the following:

“Developing our first 100 courses took about 12 years, and now, in about a year, we’re able to create and launch nearly 150 new courses. This is a great example of how generative AI can directly benefit our learners.”

The firm’s learners might well benefit, but I don’t think its business does. If AI makes building language courses that much easier, then the barriers to entry for competitors just disappeared.

To me, that looks like a really bad thing for Duolingo to be telling investors. So while the firm is trying to tell the market it’s positive, I’m not at all convinced. I could be wrong of course and if I am, the sky might be the limit for the firm.

Growth expectations

I don’t think Duolingo is going out of business. But I do see a big challenge to the firm generating the kind of growth that’s built into the multiples it’s been trading at. 

GPT-5 users are already able to build their own applications for learning languages. Whether or not they’re as good, there’s suddenly a lot more competition around.

I see this as a huge issue for Duolingo, which plans on charging its users $29.99 a month to access its AI-generated modules. But who’s going to pay that when there are free alternatives?

Even if they’re not as good (and I don’t know whether they are or aren’t), these are likely to limit the firm’s ability to raise prices over time. And that looks like a major growth challenge to me.

Software disruption

What Duolingo needs is some sort of advantage over AI-generated applications. That could potentially give it pricing power, but I don’t see that it has this. 

By itself, the Q3 earnings result is nothing to worry about. But in the context of an AI threat, a miss on future bookings and users coming in below expectations is more of a concern.

The post Why the Duolingo share price just crashed 21% appeared first on The Motley Fool UK.

Two concerns

Duolingo (NASDAQ:DUOL) is the global leader in digital language learning. But since May, its share price has fallen 41%.

This appears to be due to two main reasons. First, investors are worried about rising competition from ChatGPT and Google Translate (which has released a practice mode). Second, the stock’s forward price-to-sales ratio is still around 14. So it was very expensive before.

If the first concern is right, and Duolingo sees falling subscriber growth due to competition, then there might be significant risk here. I expect a lot of disruption from AI in future, so the firm could become a victim if it doesn’t keep innovating.

Already benefitting from AI

Fact is though, we see no evidence of disruption yet. In Q2, the language learning firm reported that daily active users grew 40% to 47.7m. And it expects full-year bookings to grow 32% (higher than previously expected).

Moreover, Duolingo was already an AI-based company before ChatGPT arrived. Its internal machine learning model, Birdbrain, uses algorithms to adjust lesson difficulty, predict user mistakes, and optimise vocabulary reviews. 

Meanwhile, Duolingo’s CEO Luis von Ahn is no stranger to computer science and AI. He invented reCAPTCHA, the system used to protect websites from spam and bots. Ironically, he sold this to Google before co-founding Duolingo! 

The company is also leveraging generative AI advancements to massively boost productivity. In April, it announced that it had used the tech to create 148 new language courses, more than doubling its current offering.

This was the largest increase in content in Duolingo’s history, and massively expanded its total addressable market. For example, speakers of 15 European languages like French, German, Italian, and Spanish can now learn Japanese, Korean, and Mandarin.

Meanwhile, speakers of Japanese, Korean, Mandarin, Vietnamese, Indonesian, Thai, and other Asian languages can now learn all of the top seven non-English languages. Previously many of these learners only had access to English.

Developing our first 100 courses took about 12 years, and now, in about a year, we’re able to create and launch nearly 150 new courses…This launch reflects the incredible impact of our AI and automation investments, which have allowed us to scale at unprecedented speed and quality.

Luis von Ahn

A bigger vision

Some investors see Duolingo as just a silly language app, with no real moat. But the company is also seeing success with its music, maths, and chess courses. It aims to eventually offer many other subjects.

In future, I can see people having to retrain a lot more due to AI job disruption. Duolingo could become the go-to education platform for this, as it offers a freemium model (no upfront costs).

Users only subscribe once they get serious about a subject (I’m currently a Duolingo Max subscriber). And learners can now add their Duolingo Score to LinkedIn profiles as a way to show their language proficiency.

As mentioned, the stock is still quite pricey. But the firm is already profitable and boasts a very healthy 34% free cash flow margin. I recently bought the dip, making it one of the top holdings in my SIPP/ISA portfolio.

The post 1 quality growth stock to consider for an ISA while it’s down 41% appeared first on The Motley Fool UK.

But rather than panic, this just gives me a chance to scoop up more shares at a lower price.

Google risk

Duolingo is the world’s most popular language learning app. When I first considered the stock, I doubted whether the firm had a durable competitive advantage. I’ve seen education technology stocks flatter to deceive over the years, including Chegg and Coursera.

Currently, investors are worried that Google Translate has parked its tanks on Duolingo’s lawn by launching an artificial intelligence (AI)-powered practice mode. Having used it last week, I think it’s very impressive, especially for a tool that’s still in beta testing.

For example, I can generate my own practice scenarios in Spanish, like suggesting dinner plans or meeting a partner’s family. Duolingo’s lessons have limited freedom to choose scenarios. I don’t know whether that’s good (more structure) or bad (lack of personalisation).

Language learners like myself wouldn’t have much reason to go to Google Translate if Duolingo offered a similar translation tool. But it doesn’t, and this gap’s let in a serious potential rival.

Jumping ship too early

In 2011, Google launched Google+, a social media platform that was meant to compete with Facebook. It quietly shut this down in 2019, around the time TikTok appeared out of nowhere.  

Anyone who dumped Facebook stock over these competitive fears would have lost out on terrific gains. Shares of Meta Platforms — as the firm’s now called — are up 180% in five years and 715% over a decade. 

It’s a similar story with Netflix. Serious competition first arrived in the shape of Amazon Prime Video, then Disney+ and other streaming services. Yet, despite this competition, Netflix has remained as popular as ever and the stock’s up 1,000% in a decade. 

Google owner Alphabet‘s another interesting example. Investors who sold a year ago due to the perceived threat from ChatGPT have missed out on a market-thumping 60% share price gain. 

Clearly, giving up on a high-quality growth stock too early can be a serious mistake.

Nothing’s really changed

This isn’t to say that Duolingo won’t be disrupted by Google Translate or some AI app like ChatGPT. I think this is a potential risk.

But these hypothetical competitive dangers don’t change the investment case for me. I’m yet to see any weakness in Duolingo’s (impressive) key growth metrics.

Just last month, the firm reported that Q2 daily active users jumped 40% year on year to 47.7m. Revenue surged 41% to $252.3m, while paid subscribers rose 37% to 10.9m.

Meanwhile, net income rocketed 84% to $44.8m, despite heavy ongoing investments for growth. And Duolingo now sports a 37% free cash flow margin.

Finally, full-year bookings guidance was raised to around $1.15bn (32% growth).

We believe we’re still early in our user growth journey. We’ve delivered innovation while growing profitability.

Duolingo CEO Luis von Ahn.

Based on next year’s forecast revenue, the forward price-to-sales ratio’s 11. Not exactly cheap. But for me, nothing’s really changed here, except the stock’s suddenly 43% cheaper.

As such, I’ll be buying more shares soon.

The post Down 43% in my ISA and SIPP, I’m buying more of this growth stock appeared first on The Motley Fool UK.