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On Thursday, DA Davidson, through its analyst Wyatt Swanson, increased the price target for Duolingo Inc. (NASDAQ:DUOL) from $400 to $410, while reiterating a Buy rating on the company’s shares. With a current market capitalization of $14.89 billion and impressive gross margins of 72.78%, Duolingo has shown strong financial performance. According to InvestingPro analysis, the company maintains robust financial health with a "GREAT" overall score. Swanson’s decision followed an updated proprietary analysis of course enrollments on Duolingo, which serves as an indicator of weekly user growth.
The analysis covers the period from February 24 to March 25 and is used to measure Duolingo’s performance against market consensus and the company’s own guidance. The findings suggest that Duolingo’s daily active user (DAU) growth for the first quarter is surpassing the consensus estimate of a 44.6% year-over-year increase. This momentum builds on the company’s strong revenue growth of 40.84% over the last twelve months, with analysts expecting sales growth of 30% in the current year. This growth also aligns with the higher end of the mid-40s percentage range guidance provided by Duolingo’s management during the fourth-quarter earnings call. For deeper insights into Duolingo’s growth metrics and 15+ additional ProTips, check out InvestingPro.
Swanson believes that the current consensus estimates may be conservative and sees potential for upside. As a result, DA Davidson has raised its own estimates and increased the price target to $410, which is based on a 19 times multiple of the company’s projected 2025 enterprise value to revenue. While InvestingPro’s Fair Value analysis suggests the stock is currently trading above its intrinsic value, the analyst’s positive outlook is rooted in the strong user growth that Duolingo has demonstrated, as implied by the recent course enrollment data. Discover comprehensive valuation metrics and expert analysis in the Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Duolingo Inc. has been the subject of several analyst updates following its impressive fourth-quarter performance. Needham, DA Davidson, and Piper Sandler have all raised their price targets for Duolingo to $400, $400, and $390, respectively, while maintaining positive ratings. These updates come after Duolingo reported substantial growth in daily active users and subscription bookings, with its premium Duolingo Max subscription contributing significantly to revenue. JPMorgan also increased its price target to $410, citing confidence in the company’s AI-driven product cycle and growth potential. Duolingo’s management has highlighted growth across all markets, alleviating concerns about mature market saturation and indicating strong user engagement. Analysts have noted the strategic importance of Duolingo’s investments in GenAI-powered functionalities, which are expected to enhance user experience and boost subscriber numbers. Additionally, Duolingo’s expansion into math and music courses has started to gain traction, attracting 3 million daily active users. Despite some short-term challenges in adjusted EBITDA guidance, analysts remain optimistic about Duolingo’s long-term growth and profitability potential.
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