Analyzing 2024 Fallen Growth Stocks Part 1: Duolingo and HIMS Investment Opportunities

Many growth stocks have experienced significant declines this year. However, not all drops carry the same meaning. Today, let us dive deep into the first two of five dramatically fallen stocks: Duolingo and HIMS.

📱 Duolingo: Revolutionizing Language Learning, Down 48% YTD

Strengths of the Business Model

Duolingo is more than just a language learning app. It is a global education platform with over 500 million users worldwide. Their business model is solid:

Premium subscription model: Converting free users to paid subscribers
Strong user engagement: High retention through gamification
AI-powered learning: Personalized learning experiences
Low customer acquisition cost: Natural growth through word-of-mouth

Why Did It Fall 48%?

Main reasons for the stock decline:

Growth rate slowdown concerns: Normalization after explosive pandemic-era growth
Valuation adjustment: Broader correction in high-valuation growth stocks
Intensifying competition: Emergence of other language learning platforms
Macroeconomic headwinds: Concerns about reduced consumer spending

Fundamentals Remain Strong

But looking at the actual business:

Subscriber count still growing
MAU (Monthly Active Users) maintaining growth trajectory
Profitability improvements underway
Brand power remains strong

💰 What is the Right Entry Price?

An additional 15-20% drop from current levels could present an attractive entry point, especially when:

P/S ratio falls below historical averages
Subscriber growth rate shows signs of reacceleration
Profitability metrics improve

When these three conditions align, it could be an excellent opportunity for long-term investors.

💊 HIMS: Telemedicine Leader, Down 30% in 6 Months

Innovative Business Model

HIMS & HERS Health is an innovative player in telemedicine:

Direct-to-Consumer (DTC) model: Eliminating intermediary distribution
Subscription-based revenue: Predictable revenue structure
Diverse product lines: Hair loss, skin care, sexual health, mental health, etc.
Convenience and privacy: From doctor consultations to prescriptions, all from home

Recent Stock Decline Background

Regulatory uncertainty: Controversies around telehealth prescriptions
Intensifying competition: Major pharmacy chains entering telemedicine
Profitability concerns: High marketing costs
Macro economy: Weakening consumer sentiment

Why It Still Deserves Attention

Structural growth trends:

Telemedicine market continues to expand
Particularly strong preference among younger generations
Digital healthcare adoption accelerated by COVID-19

Signs of improving performance:

Steady subscriber growth
Successful product line diversification
Improving unit economics

💰 What is the Right Investment Price?

For HIMS, consider these conditions:

When regulatory risks are resolved
Confirmed upward trend in ARPU (Average Revenue Per User)
Improved marketing efficiency (CAC/LTV ratio)
An additional 10-15% drop from current prices

Particularly if quarterly results confirm profitability improvements and the regulatory environment stabilizes, even current price levels could be attractive.

🎯 Investment Checkpoints

When considering both stocks:

✅ Positive Factors

Structural growth trends (language learning, telemedicine)
Solid business models
Strong brand recognition
High preference among younger demographics

⚠️ Risk Factors

High valuations (still)
Time needed to achieve profitability
Intensifying competition
Macroeconomic uncertainty

📊 Final Thoughts

Both Duolingo and HIMS offer intriguing investment opportunities. However, it is not about buy because it is down, but rather making a rational assessment of why it fell, whether fundamentals are sound, and what is a fair price.

In the next article, we will analyze the remaining three stocks - Novo Nordisk, Lululemon, and Fiserv. Each has a unique story and investment angle, so stay tuned! 💪