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Investors can be quite demanding with premium-priced companies, sending shares tumbling if earnings fail to exceed estimates significantly. This was the case with Duolingo ($DUOL), which reported Q1 earnings in early May. Despite solid results that surpassed analyst predictions across the board, the stock plunged nearly 20%.

This drop could be attributed to a 'weak' full-year outlook that was in line with estimates, without surpassing them. For high-flying stocks like DUOL, results merely meeting analyst expectations are often viewed as disappointing, which could explain the post-earnings sell-off. However, DUOL's full-year outlook, while not surpassing the high end of analyst estimates, led to a misleading investor reaction; the company is firing on all cylinders, delivering hyper-growth and increasing profitability while reducing customer acquisition concentration risk. This makes the recent dip seem like a good buying opportunity. Let’s take a deeper dive.

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