Shares of the world's largest education app, Duolingo (DUOL 0.21%), were down 14% this week as of 2:30 p.m. ET Thursday, according to data provided by S&P Global Market Intelligence.

The main reason for this decline came from a Jefferies analyst highlighting that Duolingo's daily active user (DAU) growth slowed to 37% in June.

Analysts expected 44% growth in DAUs for the company's second quarter, but the data shows it'll be closer to 39%, prompting the adverse reaction from the market.

Duolingo learns about decelerating DAU growth

While 30 days' worth of disappointing DAU data isn't bad in and of itself, it extends a worrying trend. Over the last five months, the company's DAU growth declined from 56% in February to 53% in March, 41% in April, 40% in May, and finally 37% in June.

This deceleration is far from a death knell for Duolingo's stock. But the market may be justified in lowering the company's valuation until it sees improving data.

Image source: Duolingo.

Even after this drop, the company trades at 106 times free cash flow, including stock-based compensation.

However, following this decline, I may find myself buying more Duolingo shares soon, thanks to its promising growth optionality.

Far from just a language learning app, Duolingo has multiple potential growth outlets, like:

• Adding to its courses, as it has already done with ABCs for children, math, music, and now chess.
• Building upon its standardized test offerings, such as its Duolingo English Test (roughly 10% of sales).
• Growing the advertising revenue from its non-subscriber tier (around 6% of sales).
• Incorporating artificial intelligence (AI) into its offerings, such as its video chat with Lily.

Though its days of 50% hypergrowth may be in the past, Duolingo's longer-term growth story is still in its early chapters.