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On Monday, Evercore ISI continued to endorse a positive outlook on Duolingo Inc. (NASDAQ:DUOL), maintaining an Outperform rating and a price target of $335. The firm’s analysts predict a modest beat for Duolingo’s fourth quarter results, with the company already demonstrating impressive 42.47% revenue growth over the last twelve months and maintaining strong gross profit margins of 73.13%. The analysts expect bookings to exceed the higher end of guidance by a low single-digit percentage, based on third-party data trends. According to InvestingPro, the company’s earnings report is scheduled for February 27, with analysts anticipating continued sales growth this year.
Despite the potential for a stronger quarter in terms of bookings, Evercore ISI cautions about the foreign exchange risk to Duolingo’s financials, as approximately 65% of the company’s total revenue comes from outside the United States. The analysts note that the U.S. dollar’s approximate 9% appreciation since early October could impact earnings, though InvestingPro data shows the company maintains a healthy financial position with a current ratio of 3.09 and more cash than debt on its balance sheet. Furthermore, they anticipate limited upside to the consensus estimate for Duolingo’s fourth quarter monthly active users (MAUs), which suggests a quarter-over-quarter increase of 3% or approximately 3.9 million net additions. The stock has recently experienced a 10.94% decline over the past week, potentially creating an interesting entry point for investors looking to access the company’s growth story.
Evercore ISI highlights Duolingo’s consistent history of surpassing its own revenue and EBITDA guidance. Despite this, the firm maintains a cautious stance on the market’s expectations for the company’s fiscal year 2025 EBITDA margins, which analysts at Evercore ISI believe may be overly optimistic.
The report underscores the importance of third-party data in shaping analysts’ expectations and the influence of currency fluctuations on companies with significant international revenues. As Duolingo prepares to release its fourth-quarter results, investors will be watching to see if the company can continue its track record of exceeding guidance amidst challenging foreign exchange conditions.
In other recent news, Duolingo Inc. has expanded its AI-driven Video Call feature to Android users, adding support for five new languages, including English, Spanish, French, German, Portuguese, and Italian. This feature, previously available only on iOS, enhances language proficiency by simulating real-world conversations with an AI character named Lily. In addition to this product expansion, analysts at JP Morgan have maintained an Overweight rating on Duolingo, expressing optimism about the Video Call feature’s potential to boost user engagement and teaching effectiveness. They project significant growth in paid subscribers for Duolingo’s Max product, estimating 450,000 in 2024 and 1.37 million in 2025, which could contribute substantially to subscription revenue.
Furthermore, UBS has increased its price target for Duolingo shares to $410, maintaining a Buy rating. The firm anticipates moderate growth expectations for daily active users in the upcoming fourth-quarter earnings report and expects Duolingo to adjust its full-year 2025 growth forecast. Meanwhile, Jefferies initiated coverage of Duolingo with a Hold rating and a price target of $370, citing the company’s consistent growth record but also highlighting potential challenges in expanding its user base. KeyBanc maintains a Sector Weight rating, noting Duolingo’s strong position in the market and its effective use of AI and product innovation.
Despite these diverse analyst perspectives, Duolingo’s commitment to leveraging technology for educational purposes is evident in its continuous investment in advanced learning tools. The company’s recent developments, including the Video Call feature expansion and analyst feedback, reflect ongoing efforts to enhance user experience and drive growth across its platform.
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