Tuesday, August 08, 2023
Four years ago, my wife and I visited our daughter, Kendall, who was studying abroad in Barcelona, Spain.
On the trip, I made a point to converse with the locals in Spanish. I can still remember a long chat I had with a cab driver, who even complimented me on my language skills.
I look back on that memory with fondness. And it recently occurred to me that, these days, no matter how many languages you speak...
The foreign-language learning sector can lead you to market-beating returns. Let me explain...
In college, I busted my tail to learn Spanish. It was a difficult task — admittedly, Spanish was one of the few college classes in which I didn't earn an "A" — but it helped me learn a beautiful new language.
So when I was cruising around Barcelona with my family, engaging with the local population, I was thrilled.
These days, I'm not speaking much Spanish. In fact, I'm a little embarrassed at how rusty I've gotten.
But if I ever decide to re-learn it, I'll have considerable help from an exciting piece of technology...
Before I reveal that technology, let me step back for a moment.
According to research firm Vantage Market Research, the global online education, or "e-learning," market was worth nearly $200 billion as of last year.
By 2030, it's projected to surpass $600 billion.
Online learning has exploded in popularity largely thanks to Covid. As you know, the pandemic ushered in a remote-learning revolution. Today, millions of us use things like computers, tablets, and smartphones to acquire new knowledge.
And when it comes to learning a new language, these resources, along with Artificial Intelligence ("AI"), play a major role.
Perhaps that's why it's fitting that the company I've got my eye on has been so instrumental in this new way to learn. In other words, it takes advantage of both online learning and AI to teach its customers every day.
Founded in 2011, this online web- and app-based language-learning program offers nearly 100 courses to teach more than 40 languages.
Languages range from the usual — English, German, Spanish, French — to the exotic. For example, you can learn Klingon (featured in the hit TV show "Star Trek") and Valyrian (made popular from the TV series "Game of Thrones").
But this company's platform isn't merely for those with multi-lingual aspirations. The company also offers an international English test that's used by university admissions programs worldwide. And its language-learning tools are used in an estimated 40% of all U.S. language classes.
In other words, this company is a legitimate, valuable resource. No wonder more than 500 million people use it to learn new languages...
And now, this platform has made it even easier to become bi-lingual.
Recently, the company debuted an integration with the ChatGPT AI platform. The result is an AI-enabled language-learning offering.
Using natural language processing, this AI can understand exactly what learners are saying in the language they're trying to master.
One feature adjusts the AI to the level of the user's language proficiency and then has the AI chat with the user in the language they're learning. Different scenarios enable the AI to prod the learning to use different phrases to maximize retention.
Another feature has the AI explain the "how" and "why" of any mistakes made during a lesson. It's like having a personal foreign-language teacher at your fingertips, but at a fraction of the cost.
When I was learning Spanish, I followed a rudimentary "listen and repeat" procedure. For learning words and phrases, it was fine. But conversing in the real world was a challenge.
These days, having an AI "friend" speaking in the new language with you is a game-changer. It enables anyone to learn a language in a more natural, enjoyable way.
The company featuring this AI is also branching out from just language learning. Using its well-established platform and "gamified" way to teach, the company now offers much more, including lessons in math, reading, writing, and even music.
And all this growth has paid off handsomely...
The company's number of monthly active users has soared, from around 40 million in early 2021 to more than 72 million this year.
Ninety-two percent of those users opt for the free tier of language classes, leaving the company with plenty of runway to upsell its current customers. (Despite only 8% of its users paying, this company is still the highest-grossing language app in the world.)
Over the past three years, sales have been on fire, growing an average of 60% a year. Earnings growth, however, has taken a hit as the company has invested heavily in technology and product development.
That's about to change, though, and now the firm is expected to post per-share profit growth of 192%.
Even trimming that number significantly means we'd see earnings — and presumably its stock price — double in less than two years.
Double your money in two years? Now you're speaking my language!
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Cheers and Good Investing,
Chief Investment Officer
Trend Trader Daily