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I am more surprised that Mazda's market cap is only $5B. That's just about the same as Duolingo. Interesting times we live in, really.

by chirau 5y ago

mbesto 5y ago
One company has endless growth potential, 80% gross margins, and every new customer served has marginal cost implications to the business. The other one does not. I think you can guess which one is which. For the record - I'm just as skeptical as many others are about tech valuations, but there is a legitimate reason to value companies they way we do, it's just not always a "its tech, so it has to be valued at BLAH", there's a lot of nuance to these businesses.
- dh5 5y ago
  One company has also lied about "nearly all aspects of the business," so maybe its 5B valuation is based on not quite legitimate things.
  - slymon99 5y ago
    I assume this is a comparison to duolingo, not Nikola.
- gamblor956 5y ago
  One company has endless growth potential, 80% gross margins, and every new customer served has marginal cost implications to the business. Mazda? Because according to their SEC filings Duolingo has pretty limited growth potential, increasing losses (or in other words, negative gross margins), and they spend a significant amount of money to attract each new paying customer. They only approach 80% gross margins if you use fantasy unicorn accounting instead of GAAP.
  - deleted 5y ago
    [deleted]
  - mbesto 5y ago
    Are you trolling? > Because according to their SEC filings Duolingo has pretty limited growth potential, The global market for direct-to-consumer language learning is large, growing, and shifting online. According to HolonIQ, total consumer spend on both online and offline language learning represented a $61 billion market in 2019, and will grow to $115 billion in 2025, implying a CAGR of 11% over this period. Online language learning is the fastest-growing market segment, projected to grow from $12 billion in 2019 to $47 billion in 2025, representing a CAGR of approximately 26% over this period, and to comprise 41% of total consumer spend on language learning in 2025. We believe that growth in digital spend will be driven in part by a shift away from offline offerings, as consumers seek more affordable, convenient, and higher quality online solutions.[0] > increasing losses (or in other words, negative gross margins) That's not how losses and negative gross margins work. I just double checked, gross profit for DuoLingo in 2020 was 71.55% (sorry not 80%). Compare that to Mazda's abysmal 21.7%. Cars specifically require heavy R&D (which does not go into COGS), so the comparison is a nice one since R&D for DuoLingo also requires heavy R&D. > spend a significant amount of money to attract each new paying customer Customers who pay subscriptions, not a one-time car cost. Every new car created requires upfront capital to build the car. SaaS CLV vs a car CLV requires WAY less costly touch-points after the initial sell.[1] [0] - https://www.sec.gov/Archives/edgar/data/1562088/000162828021013065/duolingos-1.htm https://www.sec.gov/Archives/edgar/data/1562088/000162828021... [1] - https://a16z.com/2014/05/13/understanding-saas-valuation-primer/ https://a16z.com/2014/05/13/understanding-saas-valuation-pri...
    - gamblor956 5y ago
      I stand by my comments. Groupon and LivingSocial said the same about their respective market, a decade ago. And if you'd done your research into HolonIQ's report, offline language learning was the supermajority of the $61 billion market. Online learning was a tiny tiny fraction of the market, and as many other commenters have pointed out: Duolingo and most of its online competitors are only good for superficial, introductory-level learning, with actual skill growth requiring in-person interaction. Moreover, Duolingo's online competition alone includes hundreds of free and paid apps and websites, plus Youtube and Twitch. Duolingo's "gross profit" is not calculated using GAAP. It's calculated using fantasy unicorn accounting. Key giveaway: if a company's revenue "more than doubles" but it's losses also more than double, it's not actually profitable on a per-unit basis; it's simply shifting items that should be reported in COGS to other items that let it artificially inflate its gross margins. In Duolingo's case, it's actually worse: while revenues doubles, losses are on track to quadruple (they reported a $13.5 million loss for just 2021Q1, compared to roughly $16 million for all of 2020). I've worked for enough startups going public that I can spot when a startup is playing games with its financials. Duolingo is one of them. This time next year, Duolingo will be looked on as 2021's Groupon.
  - gscott 5y ago
    And there are other competitors who can copy whatever they are doing. I agree Mazda provides more value.
    - mbesto 5y ago
      You know whats great about our market. If you truly believe this, you can make a duolingo copy and therefor have your own $5B company (sounds nice huh?) AND you can invest whatever assets you might have into Mazda and make money on the value of their stock.
pvarangot 5y ago
Traditional car stocks are at bargain() prices now. () some may read that as sane, or trading according to fundamentals.
- bagels 5y ago
  Only if your hypothesis is that companies like Mazda won't wither in the inevitable electric car disruption.
  - lotsofpulp 5y ago
    My guess is fossil fuel cars will remain competitive with electric cars (cost per mile wise), since the more demand for fossil fuels drop, the cheaper it gets to operate fossil fuel cars. It really depends when the governments actually start banning fossil fuel cars. Or implements higher fossil fuel taxes, but I do not see a chance of that. And I do not see bans for new fossil fuel cars actually going into effect for at least 15 to 20 years.
    - azinman2 5y ago
      At some point gas stations won’t make as much money and thus will start changing to electric. The supply could flip with current electric charging stations which will move the needle. We’ll also see what gets manufactured… there might be a time where few gas options will exist.
      - lotsofpulp 5y ago
        I do not see that point being in near future. All the infrastructure for fossil fuel delivery is already installed and can easily last decades. It will be a slow shift as more and more gas stations shift more of their space to electric charging. Or maybe they get obviated altogether since you can charge anywhere, but not in next 10 or even 20 years. Diesel is still diesel when it comes to power too, and I have not heard of any electric alternative that can compare. I expect that to stick around even longer.
    - 5y ago

I am more surprised that Mazda's market cap is only $5B. That's just about the same as Duolingo. Interesting times we live in, really.

by chirau 5y ago

I am more surprised that Mazda's market cap is only $5B. That's just about the same as Duolingo. Interesting times we live in, really.

mbesto 5y ago

One company has endless growth potential, 80% gross margins, and every new customer served has marginal cost implications to the business. The other one does not. I think you can guess which one is which. For the record - I'm just as skeptical as many others are about tech valuations, but there is a legitimate reason to value companies they way we do, it's just not always a "its tech, so it has to be valued at BLAH", there's a lot of nuance to these businesses.

dh5 5y ago
One company has also lied about "nearly all aspects of the business," so maybe its 5B valuation is based on not quite legitimate things.
- slymon99 5y ago
  I assume this is a comparison to duolingo, not Nikola.
gamblor956 5y ago
One company has endless growth potential, 80% gross margins, and every new customer served has marginal cost implications to the business. Mazda? Because according to their SEC filings Duolingo has pretty limited growth potential, increasing losses (or in other words, negative gross margins), and they spend a significant amount of money to attract each new paying customer. They only approach 80% gross margins if you use fantasy unicorn accounting instead of GAAP.
- deleted 5y ago
  [deleted]
- mbesto 5y ago
  Are you trolling? > Because according to their SEC filings Duolingo has pretty limited growth potential, The global market for direct-to-consumer language learning is large, growing, and shifting online. According to HolonIQ, total consumer spend on both online and offline language learning represented a $61 billion market in 2019, and will grow to $115 billion in 2025, implying a CAGR of 11% over this period. Online language learning is the fastest-growing market segment, projected to grow from $12 billion in 2019 to $47 billion in 2025, representing a CAGR of approximately 26% over this period, and to comprise 41% of total consumer spend on language learning in 2025. We believe that growth in digital spend will be driven in part by a shift away from offline offerings, as consumers seek more affordable, convenient, and higher quality online solutions.[0] > increasing losses (or in other words, negative gross margins) That's not how losses and negative gross margins work. I just double checked, gross profit for DuoLingo in 2020 was 71.55% (sorry not 80%). Compare that to Mazda's abysmal 21.7%. Cars specifically require heavy R&D (which does not go into COGS), so the comparison is a nice one since R&D for DuoLingo also requires heavy R&D. > spend a significant amount of money to attract each new paying customer Customers who pay subscriptions, not a one-time car cost. Every new car created requires upfront capital to build the car. SaaS CLV vs a car CLV requires WAY less costly touch-points after the initial sell.[1] [0] - https://www.sec.gov/Archives/edgar/data/1562088/000162828021013065/duolingos-1.htm https://www.sec.gov/Archives/edgar/data/1562088/000162828021... [1] - https://a16z.com/2014/05/13/understanding-saas-valuation-primer/ https://a16z.com/2014/05/13/understanding-saas-valuation-pri...
  - gamblor956 5y ago
    I stand by my comments. Groupon and LivingSocial said the same about their respective market, a decade ago. And if you'd done your research into HolonIQ's report, offline language learning was the supermajority of the $61 billion market. Online learning was a tiny tiny fraction of the market, and as many other commenters have pointed out: Duolingo and most of its online competitors are only good for superficial, introductory-level learning, with actual skill growth requiring in-person interaction. Moreover, Duolingo's online competition alone includes hundreds of free and paid apps and websites, plus Youtube and Twitch. Duolingo's "gross profit" is not calculated using GAAP. It's calculated using fantasy unicorn accounting. Key giveaway: if a company's revenue "more than doubles" but it's losses also more than double, it's not actually profitable on a per-unit basis; it's simply shifting items that should be reported in COGS to other items that let it artificially inflate its gross margins. In Duolingo's case, it's actually worse: while revenues doubles, losses are on track to quadruple (they reported a $13.5 million loss for just 2021Q1, compared to roughly $16 million for all of 2020). I've worked for enough startups going public that I can spot when a startup is playing games with its financials. Duolingo is one of them. This time next year, Duolingo will be looked on as 2021's Groupon.
- gscott 5y ago
  And there are other competitors who can copy whatever they are doing. I agree Mazda provides more value.
  - mbesto 5y ago
    You know whats great about our market. If you truly believe this, you can make a duolingo copy and therefor have your own $5B company (sounds nice huh?) AND you can invest whatever assets you might have into Mazda and make money on the value of their stock.

pvarangot 5y ago

Traditional car stocks are at bargain() prices now. () some may read that as sane, or trading according to fundamentals.

bagels 5y ago
Only if your hypothesis is that companies like Mazda won't wither in the inevitable electric car disruption.
- lotsofpulp 5y ago
  My guess is fossil fuel cars will remain competitive with electric cars (cost per mile wise), since the more demand for fossil fuels drop, the cheaper it gets to operate fossil fuel cars. It really depends when the governments actually start banning fossil fuel cars. Or implements higher fossil fuel taxes, but I do not see a chance of that. And I do not see bans for new fossil fuel cars actually going into effect for at least 15 to 20 years.
  - azinman2 5y ago
    At some point gas stations won’t make as much money and thus will start changing to electric. The supply could flip with current electric charging stations which will move the needle. We’ll also see what gets manufactured… there might be a time where few gas options will exist.
    - lotsofpulp 5y ago
      I do not see that point being in near future. All the infrastructure for fossil fuel delivery is already installed and can easily last decades. It will be a slow shift as more and more gas stations shift more of their space to electric charging. Or maybe they get obviated altogether since you can charge anywhere, but not in next 10 or even 20 years. Diesel is still diesel when it comes to power too, and I have not heard of any electric alternative that can compare. I expect that to stick around even longer.
  - 5y ago