Bullish indicating open at $55-$60, IPO prices at $37
On Friday, JPMorgan analyst Bryan Smilek reaffirmed an Overweight rating and a $360.00 price target on Duolingo Inc. (NASDAQ:DUOL), citing the company's status as a top pick in the online education sector ahead of its first-quarter earnings report on May 1, 2025. According to InvestingPro data, Duolingo currently trades at $316.94, with analyst targets ranging from $315 to $430, suggesting potential upside. The company's strong financial health is reflected in its "GREAT" overall score from InvestingPro's comprehensive analysis. Smilek highlighted Duolingo's strong daily active user (DAU) growth and the potential for increased monetization from its Max and Family plans as key drivers for the company's success.
Duolingo's DAU growth is expected to reach mid-40% in the first quarter, supported by product improvements, user re-engagement, and content expansion. This growth trajectory aligns with the company's impressive revenue growth of 40.84% over the last twelve months, as reported by InvestingPro. With 17 additional ProTips available on InvestingPro, investors can gain deeper insights into Duolingo's growth metrics and financial health. The company's focus on English learning, which represents a significant market opportunity, is also seen as a positive, given that 80% of global language learners study English, but only about 46% of Duolingo's DAUs are currently learning the language.
The analyst pointed to Duolingo's increased content velocity and the anticipated margin expansion in the second half of 2025 despite ongoing investments in growth and artificial intelligence. Data from Sensor Tower suggests a year-over-year DAU growth of 41% in the first quarter, with consistent monthly increases from January through March.
Duolingo's monetization efforts are expected to benefit from the optimization of features and pricing for its Max subscription service. The service is projected to see a threefold increase in paid subscribers in 2025, contributing significantly to the company's bookings. Additionally, the Family plan, which accounts for approximately 23% of subscriptions, is anticipated to play a role in deeper monetization throughout the year.
While AI-related costs are expected to impact margins in the first half of 2025, Duolingo is poised to manage these expenses efficiently and improve margins in the second half of the year. The company projects year-over-year leverage across non-GAAP operating expenses for 2025. InvestingPro analysis reveals the company maintains impressive gross profit margins of 72.78% and holds more cash than debt on its balance sheet, demonstrating strong financial management. For comprehensive analysis of Duolingo's financial metrics and future prospects, investors can access the detailed Pro Research Report, available exclusively on InvestingPro. JPMorgan forecasts a 28% year-over-year growth in bookings for 2025, with adjusted EBITDA margins of 27.7%, figures that could potentially be conservative given the market's expectations.
Investors are also looking forward to potential upward revisions to Duolingo's full-year 2025 bookings growth guide, with favorable foreign exchange rates contributing positively to the company's performance. Smilek's price target of $360 for Duolingo is based on approximately 41 times the free cash flow of $432 million, supported by projected average growth rates for bookings, adjusted EBITDA, GAAP EPS, and free cash flow for 2025 and 2026.
In other recent news, Duolingo Inc. has been the focus of multiple analyst updates and projections. JPMorgan recently revised its price target for Duolingo to $360, down from $410, citing potential macroeconomic pressures that might affect consumer spending and advertising budgets. Despite these concerns, JPMorgan expects Duolingo's first-quarter results to show upside in Bookings, Revenue, and adjusted EBITDA. Meanwhile, DA Davidson raised its price target for Duolingo to $410, maintaining a Buy rating, based on strong daily active user growth and positive course enrollment data that suggest potential upside to current estimates.
Piper Sandler highlighted Duolingo as a company poised to benefit from the anticipated growth in the Consumer AI market, which is projected to grow significantly in the coming years. The report suggests that Duolingo, along with other major tech firms, could leverage AI advancements to expand its reach and user engagement. Additionally, JPMorgan remains optimistic about Duolingo's AI-driven product cycle, particularly its feature Max, which is expected to significantly boost the company's paid subscriber base.
Both JPMorgan and DA Davidson have shown confidence in Duolingo's growth trajectory, with JPMorgan predicting that Max will account for a substantial portion of Duolingo's subscriber base by 2025. These recent developments underscore the ongoing interest and potential for growth within Duolingo as it navigates macroeconomic challenges and capitalizes on AI advancements.
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