Duolingo(DUOL) The Motley Fool·2024-12-15 09:49Market Overview - The stock market has seen significant growth this year, with the S&P 500 up by 27%, nearly tripling its average annual gain since 1957 [1] Technology Sector Performance - The technology sector is leading market gains, particularly companies involved in the AI revolution, with Duolingo and Lemonade seeing substantial stock price increases of 50% and 150% respectively in 2024 [2] Duolingo Analysis - Duolingo is the largest digital language education platform, boasting 113.1 million monthly active users, a 36% increase year-over-year [3] - The company has accelerated its paying user growth by 47%, reaching 8.6 million, aided by the introduction of a new subscription tier called Max, which includes advanced AI features [4][6] - Duolingo's revenue for the third quarter was 744 million [7] - The current price-to-sales (P/S) ratio for Duolingo is 23.5, significantly above its historical average of 15.1, but projected revenue growth could make the stock appear less expensive in the future [8] - If Duolingo maintains its P/S ratio and meets Wall Street's 2025 revenue forecast of 889 million, a 24% increase year-over-year, while also reducing its employee headcount by 7% [14] - The gross loss ratio fell to 73%, the lowest in four years, indicating effective risk management and operational efficiency [15] - Lemonade's stock is currently trading at a P/S ratio of 6.1, well below its historical average of 19.3, suggesting it may be undervalued despite a 150% gain in 2024 [16][17]