Duolingo stock rating upgraded by KeyBanc to Overweight on product improvements

Investing.com - KeyBanc upgraded Duolingo Inc. (NASDAQ:DUOL) from Sector Weight to Overweight on Monday, setting a price target of $460.00. According to InvestingPro data, analyst targets for Duolingo currently range from $390 to $600, with the company maintaining impressive revenue growth of 39.5% over the last twelve months.

The upgrade comes as KeyBanc views the recent AI backlash affecting the language learning platform as merely "a bump in the road" rather than a long-term concern for the company. The company’s solid fundamentals support this view, with InvestingPro data showing robust gross margins of 72% and a strong financial health score.

KeyBanc cited several potential growth drivers in its analysis, including Duolingo’s Energy rollout feature, upcoming September Duocon updates, and the company’s viral marketing efforts, which together create "upside risk to estimates over the next 12 months."

The research firm also identified price optimizations as an "untapped growth lever" that could enhance both revenue growth and profitability for the language learning platform.

KeyBanc’s $460 price target represents a 38.3x multiple on its 2027 estimated EV/EBITDA, with the firm noting its forecasts for 2026 and 2027 are now "slightly ahead of Street revenue and EBITDA" expectations.

In other recent news, Duolingo reported quarterly results that exceeded expectations, with bookings surpassing forecasts by 9%. This strong performance was attributed to foreign exchange benefits, advertising revenue, and the success of its Super subscription plans. The company’s EBITDA results also outperformed expectations by 29%, showcasing robust financial health. Following these results, Wolfe Research maintained its Peerperform rating on Duolingo, while Raymond James reiterated a Market Perform rating, highlighting the company’s solid second-quarter 2025 outcomes and improved outlook for the latter half of the year.

In terms of analyst ratings, Morgan Stanley reiterated its Overweight rating on Duolingo, setting a price target of $500 amid concerns about competition from OpenAI’s language learning tools. Meanwhile, JPMorgan increased its price target for Duolingo to $515, citing innovations in generative AI, stable daily active user trends, and enhanced monetization of its Max subscription tier. DA Davidson also maintained a Buy rating with a $500 price target, reflecting confidence in Duolingo’s future growth. These developments indicate a positive sentiment among analysts toward Duolingo’s performance and strategic direction.

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