What Happened?
Shares of language-learning app Duolingo (NASDAQ: DUOL) fell 3.7% in the morning session after analysts at D.A. Davidson downgraded the stock's rating to 'Neutral' from 'Buy'.
Alongside the downgrade, the brokerage slashed its price target on the language-learning platform's stock by 40%, moving it to $300 from $500. The firm cited concerns over decelerating active user growth, which it attributed to minimal social media marketing and increased competition from AI-first alternatives. Despite the significant cut, the new price target still represented a potential 6.1% upside from the stock's previous closing price. The downgrade reflects growing valuation concerns as the company's user expansion begins to slow down.
After the initial drop the shares shed some of the losses and rose to $268.46, down 4.9% from previous close.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Duolingo? Access our full analysis report here, it’s free.
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 6 days ago when the stock dropped 7.3% on the news that the stock's weakness continued as Google unveiled a suite of new AI-powered language learning tools, signaling a significant increase in competition. The move by the tech giant introduces advanced, free offerings that could challenge Duolingo's market position and user engagement model. Google's entry into the language-learning space raises concerns among investors about Duolingo's future growth prospects and its ability to compete against a major corporation with vast resources.
Duolingo is down 17.6% since the beginning of the year, and at $268.46 per share, it is trading 50.3% 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 $1,931.
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