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On Thursday, DA Davidson analyst Wyatt Swanson revised the price target for FangDD Network (NASDAQ: DUO), increasing it to $410 from the previous target of $400, while reiterating a Buy rating on the company’s shares. The stock currently trades at $0.31, near its 52-week low of $0.30, having declined over 90% in the past year according to InvestingPro data.
Swanson’s adjustment follows a detailed analysis of Duolingo (NASDAQ:DUOL)’s course enrollment data, which serves as an indicator of the company’s weekly user growth. The data spans from February 24 to March 25, allowing the analyst to assess the company’s performance against market consensus and its own financial guidance. InvestingPro analysis reveals the company’s challenging position, with a weak Financial Health Score of 1.2 and revenue of $37.35M in the last twelve months, though showing modest growth of 6.61%.
The updated figures suggest that Duolingo’s current first-quarter daily active user (DAU) growth surpasses the year-over-year consensus estimate of 44.6%. This growth also aligns with the upper range of the "mid-40s" guidance provided by management during the fourth-quarter earnings call.
Based on these observations, Swanson believes that Duolingo’s performance could exceed current market expectations. He states, "We think that there is upside to current consensus estimates and affirm our BUY-rating and bump our estimates and increase our price target from $400 to $410." The new price target is based on a 19 times multiple of the company’s projected 2025 enterprise value to revenue.
The reaffirmed Buy rating and increased price target reflect DA Davidson’s confidence in FangDD Network’s growth trajectory and potential for delivering value to its shareholders. However, InvestingPro data shows the company holds more cash than debt on its balance sheet, though it’s currently not profitable with a gross profit margin of 14.31%. Subscribers can access 12 additional InvestingPro Tips and comprehensive financial metrics to make more informed investment decisions.
In other recent news, Fangdd Network Group Ltd. has secured a $5 million financing deal through convertible promissory notes and additional Class A ordinary shares. The notes, which mature in nine months, come with a 5% original issue discount and are senior to all existing debt. Investors have the option to convert these notes into shares at a predetermined price, with a floor price set to protect against excessive dilution. The transaction, facilitated by MM Global Securities, Inc., is expected to close soon, and the proceeds will be used for general corporate purposes.
Additionally, Fangdd has received a notification from Nasdaq regarding its non-compliance with the minimum bid price requirement, as its share price has closed below $1 for 30 consecutive business days. The company has 180 days to regain compliance by ensuring its share price meets or exceeds $1 for at least ten consecutive business days. If Fangdd fails to meet this requirement, it may qualify for an additional compliance period, provided it meets other listing standards. Despite these challenges, the company is actively exploring options to address the deficiency and maintain its Nasdaq listing.
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