🗞 Duolingo Multi-Bagger: Day 1

WHILE YOU POUR THE JOE… ☕️

You know what they say, one man’s trash is another man’s treasure.

In the $350s, I probably would have agreed with you: AI will kill Duolingo and other names like Adobe or Salesforce.

As a matter of fact, I wrote about this in August 2025, and we made a hefty profit from the short call.

Now I’m telling you to reconsider the trend, and the one stock to do well is Duolingo for a few reasons.

Like:

• ROIC is up 10x over three years

• FCF now makes up 37% of sales (28% three years ago)

• It commands a premium over peers like Udemy and Coursera

Today is day 1, and I hope to clearly explain the rationale for this premium and show you exactly how I make my trading and investing decisions.

Not to say this is MY system, far from it.

I just copied what I learned at Goldman Sachs, and now some of that experience can be yours.

Speaking of Duolingo’s setup, let’s get on with today’s email 📧…

BUILDING THE FOUNDATION
Don’t Make The Same Mistake

You know the reason why most of your trades fail?

This also applies to those you follow on Twitter / YouTube.

They lack a solid foundation; in fact, they start at the chart-analysis level. For Duolingo, we got started far away from the stock chart.

We begin at the industry level:

There are three industries that can significantly outperform in 2026:

1. Auto Tires-Trucks

2. Business Services

3. Basic Materials

While I've already shared my top picks in the Deal Room (get 7 Days Free if you haven’t checked it out), one industry is still missing.

That’s business services.

More specifically, the information industry within business services caught my attention.

After refreshing the ISM Services index in my proprietary data room, it became clear that information is in a quarterly expansion.

You can probably agree with me here, especially for December’s reading being above the quarterly average.

At this stage, you might be thinking of some names in the information space that make good buys, aren’t you?

That’s a normal reaction, but I want you to focus on really understanding the industry’s trend first.

The information industry’s top executives spoke their minds, and the overall feeling is that prices are too high.

Simply put,

Despite the rise in business activity, the tightening supply of available cloud and computing power is squeezing margins at the infrastructure level.

This piece of information helps you filter through some of the names you had in mind, doesn’t it?

Specifically:

• You want to find high FCF names relative to revenues and Market Caps

• Those with falling margins won’t make the cut in your list, and can even be short candidates

So, even though you are now bullish on the information industry, your stock selection has become just a bit more specific.

And that’s good.

You can argue against Duolingo all you want, but the market has spoken.

This stock now commands a premium above most peers in the space, despite falling to 30% of its 52-week highs.

That’s exactly where the concept of price and value diverges.

• Forward P/E 39.1x vs peer average of 16.1x

• P/B of 6.3x vs peer average of 3.8x

However,

The forward EPS growth in Duolingo is concerning, at a 50% contraction.

This decline, though, is likely already priced in.

Let me rephrase,

You priced it in with me when we shorted it at $350.

Now it’s time to start looking at the flipside angle for the future.

Specifically dissecting the bear case down to the bones:

• AI will kill businesses like Duolingo

It very well could, except for Duolingo’s silver bullet:

Remote jobs with major firms are in high demand.

Foreigners would kill to have these, but they need to show they can speak the language, whether it be:

• English

• Spanish

• Mandarin

While ChatGPT can teach you any of these up to a professional level, you can’t tell a potential employer you are qualified because of ChatGPT lessons.

At least not yet.

With certificates backed by prestigious universities worldwide, Duolingo has found its moat in an AI-threatened industry.

This satisfies your previously made filter:

• You want to find high FCF names relative to revenues and Market Caps

• Those with falling margins won’t make the cut in your list, and can even be short candidates

Tomorrow, we’ll dig deeper into Duolingo’s financials and valuation cases.

Trust me, you’ll want to stick around for this one.

Before you go, though…

Here’s a gift to sweeten your stay with me:

• Access to the Duolingo Financial / Valuation model

• Live coverage of the stock’s price action for entries/exits

• Updates when earnings come out, or whales step into it

• Unlimited Q&A on this and other ideas

All included in a 7 Day free trial to the Deal room.

Success in trading comes down to a few choices.
THIS is one of them.

Why miss it?

See you tomorrow,

G 🫰