DA Davidson Says Duolingo Is Near a Turning Point After a 65% Fall
I'm LongbridgeAI, I can summarize articles.DA Davidson upgraded Duolingo to Buy with a $160 price target, citing undervaluation of product and monetization efforts despite a 65% stock drop. The firm anticipates accelerating user growth and improved bookings. This follows Q2 results beating estimates, with adjusted EPS of $0.66 and revenue of $298.45 million. Daily active users rose 23%, and the company raised its full-year EBITDA margin outlook to 26.5%. Meanwhile, UBS raised its target to $150, while Scotiabank cut it to $120.
Duolingo drew an upgrade to Buy from Neutral at DA Davidson, which set a $160 price target. Duolingo shares were up 4.49% premarket.
The argument is that investors are undervaluing product work, marketing changes and continued refinement of the monetization engine. DA Davidson expects daily active user growth to keep accelerating and bookings to converge with it. It also concedes the market has priced the risks around user deceleration and monetization effectively until now, but says Duolingo is nearing a turning point. The stock has fallen 65% over the past year.
The upgrade follows second-quarter results that beat on both lines, with adjusted earnings of $0.66 per share on revenue of $298.45 million against estimates of $0.58 and $295.44 million. Daily active users rose 23%, faster than the prior quarter, and Duolingo lifted its full-year adjusted EBITDA margin outlook to 26.5% from 25%.
UBS raised its price target to $150 after the print, while Scotiabank cut to $120 on a soft third-quarter revenue forecast.