This growth stock down 50% reminds me of Netflix in 2009

Many progress shares have performed rather well in my portfolio in 2025, together with Rolls-Royce, Uber, Cloudflare, Roblox, and Crowdstrike.

Nevertheless, probably the most disappointing by far has been Duolingo (NASDAQ:DUOL). Since I invested, my whole paper loss is now round 50%. Ouch!

Sticky platforms

Every time a inventory collapses like this, it’s necessary to revisit the unique funding thesis. If that is damaged, it’s higher to withstand actuality as a result of the inventory could maintain falling and by no means get well.

Once I first explored Duolingo, I used to be sceptical the language studying app had any sturdy aggressive benefit (moat). But it rapidly jogged my memory of Netflix (NASDAQ:NFLX). Each are scalable, international client platforms monetised by subscriptions (primarily) and adverts.

As with Duolingo at present, it wasn’t apparent again in 2009 that Netflix had a sturdy moat. Its streaming mannequin might simply be replicated, and certainly has been since by the likes of Amazon, Apple, Disney, Paramount, and ITV. Ever extra competitors is a threat to progress.

But Netflix has endured due to its model energy, widespread exhibits, and complicated AI/algorithms used to suggest content material.

Likewise, Duolingo has a powerful model, extremely engaged consumer base, and robust AI credentials. Its Birdbrain AI system processes over 1.25bn day by day workout routines, serving to feed machine-learning fashions that personalise customers’ studying experiences.

Crucially, each even have distinct company cultures centered on long-term worth creation over short-term earnings.

Our long-term targets stay unchanged: To be an important Web film service…and to develop subscribers and earnings yearly whereas
persevering with to put money into streaming.

Netflix CEO Reed Hastings, 2009 annual report.

Certainly one of our 5 working rules is ‘take the lengthy view’. The chance forward of us is to show billions of individuals, and whereas we’ve made unimaginable progress, we all know we’re early in our journey.

Duolingo CEO Luis von Ahn, 2025.

Damaged thesis?

Duolingo’s Q3 outcomes, I see no proof the expansion story’s unravelling. Every day energetic customers hit a report 50.5m whereas month-to-month customers topped 135m.

Income jumped 41% 12 months on 12 months to $271.7m and adjusted EBITDA surged 68% to $80m.

Wanting forward although, administration will shift focus from growing paid subscribers (monetisation) to enhancing educating high quality to drive long-term consumer progress. And this dangers some margin stress and, probably, lower-than-expected bookings.

Being real looking

Now to be clear, I’m not saying Duolingo will grow to be a world juggernaut price $480bn like Netflix. The streaming chief’s shares are up roughly 14,000% since 2009, and such returns are exceptionally uncommon. Therefore why I mentioned it solely jogs my memory of a younger Netflix.

Additionally, I don’t wish to downplay AI threats or dwell translation from Google and Meta glasses. Though it’s price remembering that folks use Duolingo recurrently to study a second language, not translate conversations.

In the meantime, ChatGPT has no structured curriculum and/or gamified options like streaks to maintain customers engaged.

Of Duolingo’s 135m customers, solely 9% (11.5m) at present are paid subscribers. Contemplating there are 1.5bn folks studying a overseas language, the market alternative stays huge, particularly in Asia. And this excludes maths, music, chess and different future topics.

With the inventory buying and selling at a far cheaper valuation than six months in the past, I feel it’s price assessing. I feel the crashing share worth doesn’t replicate the precise power of the underlying enterprise.