The Nasdaq-100 index dropped 5.5% last week as artificial intelligence stocks that previously drove market gains experienced a significant pullback. This decline has created valuation gaps in specific growth stocks, including Duolingo and SentinelOne, which analysts suggest may present buying opportunities if the sector-wide sell-off continues.
Duolingo operates the world's largest digital language education platform. Although its stock has rallied over the past six months, it remains 73% below its record high from last year. Investor concerns that artificial intelligence might disrupt the company's core business appear to be exaggerated by management's medium-term growth forecasts. As of June 30, Duolingo reported 58.7 million daily active users, a 23% increase from the same period last year.
The company is currently prioritizing user acquisition over immediate monetization, with a goal of reaching 100 million daily active users by 2028. Management believes this larger user base will eventually drive substantial revenue and earnings growth through subscriptions. Artificial intelligence is becoming a central component of the user experience; paying subscribers can already use a feature called Video Call to practice speaking with a digital avatar named Lily. The company plans to introduce more speaking exercises to the free version of its app to boost engagement and attract new users.
Financial metrics indicate Duolingo is trading at a discount relative to its historical averages and peers. The company generated $1.14 billion in revenue over its last four reported quarters, resulting in a price-to-sales ratio of 6. This is significantly lower than its five-year average of 14.4. According to Yahoo! Finance, Wall Street expects revenue to grow to $1.37 billion in 2027, which would lower the forward price-to-sales ratio to 4.7. Additionally, with earnings of $8.46 per share over the last four quarters, Duolingo's price-to-earnings ratio stands at 16.6. This is cheaper than both the S&P 500, which has a price-to-earnings ratio of 23.5, and the Nasdaq-100, at 30.2.
SentinelOne offers a cybersecurity platform called Singularity that secures enterprise networks, employee identities, and endpoints against both internal and external threats. The platform includes an integrated AI assistant named Purple AI, which autonomously investigates incidents. SentinelOne has also developed specific tools to protect enterprises deploying their own AI systems, including prompt security features designed to defend against prompt injection attacks where hackers attempt to trick AI agents into revealing sensitive data.
At the conclusion of its fiscal 2027 second quarter ended July 31, SentinelOne reported record annual recurring revenue of $1.2 billion, a 22% increase from the year-ago period. Revenue from its AI products, including Purple AI and Prompt Security, nearly tripled during this time, positioning them as a key growth driver. SentinelOne's valuation is among the lowest in the cybersecurity sector, with a price-to-sales ratio of 6.7. This compares to ratios between 10.2 and 43.3 for competitors CrowdStrike, Palo Alto Networks, and Zscaler.