The steep declines we’ve seen this year have been terribly painful for people who already own the stocks that have plunged. Fortunately, times like these often create opportunities to start new positions or average out fallen ones.
These stocks are more than 50% below the high waters they set not so long ago. Buying back stocks at their recently reduced prices could go a long way to boosting your overall portfolio in years to come.
PubMatic
PubMatic (PUBM -1.37%) is a promising player in the rapidly changing advertising industry. Publishers and app developers use the sell-side platform to auction off their ad inventory to the highest bidders.
PubMatic’s revenue comes primarily from revenue sharing agreements with its publishers, and they are obviously happy with the service. The company’s net dollar retention rate during the 12 months ended March 31, 2022 was 140%. This means that existing ad buyers are spending more on PubMatic’s platform and its publishers are spending more of their inventory.
In the first quarter, PubMatic earned $17 million before subtracting interest, taxes, depreciation and amortization (EBITDA). This was 17% higher than the prior year period, but it was not enough for the market. The stock has fallen 77% from its peak a year ago.
PubMatic sports a market capitalization of $843 billion at recent prices, which is tiny compared to its addressable market. According to eMarketer, US advertisers spent $106 billion on programmatic display ads in 2021, up 41% from a year earlier.
Global advertising spending reached $772 billion in 2021, and that figure is expected to reach $1 trillion in 2026. PubMatic could grow several times its current size as programmatic ad buying accounts for a growing share of that. already huge market.
Duolingo
Duolingo (DOUOL -2.51%) is a language education company. The company consistently crushes Wall Street estimates, but the stock is down about 57% from its 2021 peak.
Duolingo operates the language learning app of the same name. The app had 2.9 million paying subscribers at the end of March, up 60% from a year earlier. All these subscribers make it the most profitable educational app on Applethe App Store and Alphabetfrom Google Play Store.
The Duolingo app uses a “freemium” model, and the vast majority of its 49.2 million monthly active users don’t pay. However, they provide the business with plenty of data, so it knows which lessons to take away and which to prune.
English-speaking Native Americans typically use Duolingo to casually brush up on a language before traveling. In non-English speaking countries, however, learners are more strongly motivated by career opportunities. When the company went public last July, there was a single paid subscription price for each country. This year, the company began to adjust its prices country by country, which could lead to an increase in paid subscriptions from international customers.
Duolingo is also strengthening its international footprint with an English proficiency test that is already accepted by Yale, Johns Hopkins, and over 3,500 other institutions. In the first quarter, Duolingo reported $8 million in English testing revenue, a 60% year-over-year increase, and there’s clearly plenty of room for more growth in this niche. Duolingo’s biggest competitor for English proficiency testing, IDP Education of Australia, expects more than $300 million in revenue from its proficiency test, called IELTS, this year.
Right now, shares of Duolingo are trading at just 11.3 times trailing sales. That’s a shockingly low multiple for a company that expects sales to grow 56% this year. With an attractive price, a meteoric growth rate and a huge addressable market, this stock is a crying buy right now.
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