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Duolingo acquisition powers DUOL stock price but insiders continue selling shares

By Indrabati Lahiri

15:37, 7 October 2022

A board showcasing different languages for the word
Duolingo has recently acquired the animation start-up Gunner, which creates animations for Google and Amazon as well – Photo: Getty Images

Duolingo (DUOL) has recently made headlines with its first acquisition of an animation studio called Gunner, based in Detroit. This is a start-up which designs animations for Duolingo (DUOL), including the much-loved green owl Duo, as well as for other notable names such as Dropbox (DBX), Google (GOOG), Spotify (SPOT) and Amazon (AMZN)

Although Duolingo (DUOL) has hailed this move as just the start of many more acquisitions to come, insiders seemed to have been a little spooked, with many continuing to sell their shares.

 Duolingo (DUOL) has just seen its first official merger

What do we know about DUOL's first acquisition?

Although it has currently refused to reveal the exact terms and price of the acquisition - just yet,  it's likely it will become public knowledge, come the next earnings season. In the meantime, it is thought that this acquisition has also spurred the company’s plans to expand, with it opening a Detroit office as well.

Gunner has been chosen by Duolingo (DUOL) due to a clear alignment of values between both the companies, which are very metrics focused. Furthermore, the Gunner team, consisting of about 15 people, will be integrated into Duolingo staff. Although Duolingo (DUOL) has not made any formal acquisitions before this, it did acqui-hire Steve Ridout, who is responsible for the e-learner which is the basis of Duolingo (DUOL) stories, which have taken learners by storm.

The company has also started recruiting more staff with expertise in the merger and acquisition department, most likely to help with future acquisitions.

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Why are insiders getting worried?

Insiders are getting a little worried and have been selling a number of Duolingo (DUOL) shares for the last few weeks. This includes the Chief Financial Officer of the company, Matthew Skaruppa, as well as the Chief Technology Officer, Severin Hacker, who became the latest to sell about $965,400 worth of shares.

This could be due to insiders being worried about Duolingo (DUOL) taking over a company which is not very related to the edtech sector, as well as DUOL’s relative inexperience in the area of mergers and acquisitions.

COIN

266.50 Price
+2.730% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 1.54

NVDA

901.54 Price
+0.030% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 0.29

RDDT

49.39 Price
-13.870% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 0.34

WEEDca

11.66 Price
-10.320% 1D Chg, %
Long position overnight fee -0.0255%
Short position overnight fee 0.0036%
Overnight fee time 21:00 (UTC)
Spread 0.10

Furthermore, investors could also be worried about the CEO of the company, Luis Von Ahn, having gone on record to say that he doesn’t keep a very close eye on the competition and that the company has been taking more of a “wait and watch” approach all these months.

 

What is the outlook for DUOL?

Goldman Sachs (GS) has increased Duolingo (DUOL)’s price target to $84 (£75.61), with Barclays (BARC) also following suit and pulling up the company’s price target from $95 to $102. JMP Securities gave the company a “buy” rating, with Piper Sandler giving it an “overweight” rating as well.

Duolingo (DUOL) has also gone on to highlight that any future acquisitions need to fall in the following three categories, which are more or less related to the company’s own niche: other education verticals, language learning or tech capabilities.

Investors are also cautiously optimistic about the company, due to it still riding on the boom online education received throughout the pandemic, which is likely to change the direction of e-learning applications for the coming future.

Markets in this article

GOOG
Alphabet Inc - C (Extended Hours)
152.56 USD
0.09 +0.060%
AMZN
Amazon.com Inc (Extended Hours)
180.06 USD
-0.31 -0.170%
BARC
Barclays
1.8375 USD
0.0195 +1.080%
DBX
Dropbox
24.36 USD
-0.13 -0.530%
DUOL
Duolingo, Inc.
220.75 USD
-0.77 -0.350%

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