Robinhood shares gain on Q2 beat, as user and crypto growth accelerate
On Monday, JPMorgan reiterated its Overweight rating and $400.00 price target on shares of Duolingo Inc. (NASDAQ:DUOL), emphasizing the potential for robust growth in daily active users (DAUs) and bookings. The firm projects a significant increase in DAUs, driven by various factors including marketing initiatives and new product features.
Duolingo's growth is anticipated to be fueled by several key initiatives. The company is expected to see a 52% rise in DAUs in the fourth quarter, with continued growth into the following year. The introduction of the Max subscription service, which includes features like Video Call on Android and additional language options, is projected to reach 1.37 million subscribers by 2025, contributing significantly to revenue.
The analysis also suggests that Duolingo's bookings will grow by 26% year-over-year in 2025, potentially undervaluing the company's growth prospects. This growth is expected to be driven by product enhancements, the Family plan, and international monetization efforts. The firm's estimates for 2025 also include a forecast of 2.65 million new paid subscribers, totaling 12.07 million, and an average revenue per user (ARPU) growth of 1.4%.
JPMorgan's outlook for Duolingo is also positive due to the company's long-term pricing power, which is supported by a mix shift towards the Max and Family plans, and an effective freemium funnel strategy. Despite expectations for gross margin contraction due to the ramp-up of Max and Video Call usage, the firm models a 290 basis point year-over-year expansion in adjusted EBITDA margin to 28.5%.
Investor sentiment is currently mixed, with focus areas including the growth of daily active users, bookings, and the monetization of the Max service and international markets. The firm believes that Duolingo's execution against these metrics will be key, with investor expectations set high for the fourth quarter guidance and potential upward revisions to 2025 bookings growth projections.
"In other recent news, education technology company, Nerdy Inc., reported a 7% decline in year-over-year revenue in its third-quarter earnings, totaling $37.5 million. Despite a dip in consumer revenue, the company expanded its reach by providing free access to Varsity Tutors for an additional 1.1 million students. Canaccord Genuity adjusted its outlook on Nerdy, reducing the price target while maintaining a Hold rating on the stock. The firm anticipates some of Nerdy's current challenges will continue into the first half of 2025, but foresees an improvement in fundamentals over the next year, laying a solid foundation for growth starting in fiscal year 2026. On another note, Nerdy has successfully regained compliance with the New York Stock Exchange's minimum share price requirement, ensuring that its Class A Common Stock will continue to be listed on the NYSE. The company's guidance for the fourth quarter indicates revenues and adjusted EBITDA significantly below market expectations. However, average revenue per member is projected to increase gradually. Nerdy, Inc. is also showing promise in institutional growth, with 32% of paid contracts and 22% of total bookings coming from school districts transitioning from free to paid services. These recent developments emphasize the company's commitment to navigating market challenges and focusing on sustainable growth."
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