What Happened?
Shares of language-learning app Duolingo (NASDAQ: DUOL) jumped 8.6% in the morning session after a positive analyst note highlighted a strategy that could significantly boost future profits.
Citizens JMP maintained its Market Outperform rating and $500 price target, pointing out that Duolingo's push to direct new subscribers to its web platform instead of app stores could increase its 2027 EBITDA by approximately 10%. By bypassing Apple's estimated 20% take rate for a much lower 3% processing fee from services like Stripe, the company stands to make significant savings. This optimistic analysis is supported by the company's strong financial health, including a 41.5% year-over-year revenue increase in its last reported quarter. Other analysts have also recently expressed confidence, with JPMorgan and Morgan Stanley maintaining Overweight ratings due to advancements in AI and monetization.
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What Is The Market Telling Us
Duolingo’s shares are extremely volatile and have had 36 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 3.7% on the news that Baird initiated coverage on the stock with a 'Neutral' rating and a $280 price target.
The price target implies a potential upside of about 3.3% from the stock's current level. While analyst Vikram Kesavabhotla affirmed Duolingo's effective product development and strong position in the language learning market, the 'Neutral' rating reflects competitive risks that may make investors cautious. The positive stock movement also comes as the company prepares to unveil major product updates, including new non-language offerings like Chess, Math, and Music, at its Duocon conference on September 16th. This follows a period of strong growth, with the company recently reporting a 41% increase in revenue and a 40% increase in daily active users.
Duolingo is down 3.8% since the beginning of the year, and at $313.53 per share, it is trading 42% below its 52-week high of $540.68 from May 2025. Investors who bought $1,000 worth of Duolingo’s shares at the IPO in July 2021 would now be looking at an investment worth $2,255.
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