Needham raises Duolingo stock target to $400 on strong growth

On Friday, Needham analysts increased their price target on Duolingo Inc. (NASDAQ: NASDAQ:DUOL) shares to $400 from the previous target of $385, while maintaining a Buy rating. Currently trading at $375.78, the language learning platform has demonstrated remarkable momentum with a 92% return over the past year. The revision follows Duolingo’s impressive fourth-quarter performance, which featured significant growth in daily active users (DAUs) and subscription bookings.

Duolingo reported over 50% growth in DAUs for yet another quarter, alongside a 50% acceleration in subscription bookings. The company’s impressive 40.8% revenue growth and strong gross profit margin of 72.8% reflect this momentum. According to InvestingPro analysis, Duolingo maintains a "GREAT" financial health score, though current valuations suggest the stock is trading above its Fair Value. This success is attributed to the robust early uptake of Duolingo’s premium-priced Duolingo Max subscription tier and a positive shift in the Family Plan mix. Despite a weaker-than-anticipated adjusted EBITDA forecast for the fiscal year 2025, Needham remains optimistic about the company’s prospects.

Analysts at Needham believe that Duolingo’s investments in enhancing its GenAI-powered Video Call functionality are strategic moves that will pay off in the long run. With InvestingPro data showing multiple positive indicators, including strong liquidity and expected sales growth, investors can access a comprehensive analysis of Duolingo’s potential through the Pro Research Report, available exclusively to subscribers. They consider the company’s initial topline guidance to be on the conservative side, which they think leaves room for Duolingo to surpass expectations and continue its trend of outperforming projections throughout the fiscal year.

Needham’s stance is to continue recommending Duolingo shares, especially during any price dips. The firm’s analysts are confident in the language learning platform’s ability to sustain its growth trajectory and deliver long-term gains, despite the short-term challenges reflected in the adjusted EBITDA guidance. The positive outlook is based on the company’s strong fundamentals and the strategic initiatives it has in place, supported by its healthy balance sheet with more cash than debt and impressive return metrics.

In other recent news, Duolingo Inc. reported a strong financial performance for the fourth quarter of 2024, with revenue reaching $209.6 million, surpassing the forecasted $205 million. This marks a 39% year-over-year increase, highlighting the company’s continued growth in the educational technology sector. Additionally, Duolingo’s total bookings saw a 42% year-over-year rise, reflecting robust demand for its offerings. Piper Sandler has adjusted its outlook on Duolingo, raising the stock price target to $390 from $351 and maintaining an Overweight rating, following the company’s positive financial results and significant bookings growth.

Duolingo’s premium service, Duolingo Max, now accounts for 5% of total subscribers, while the family plan represents 23%, both showing higher retention rates. Despite these positive developments, Duolingo’s stock experienced a decline in aftermarket trading, possibly due to concerns over increased marketing expenses and potential future AI costs. Looking ahead, Duolingo anticipates surpassing $1 billion in bookings in 2025 and aims to expand its adjusted EBITDA margin to 27.5%. The company is also focusing on leveraging AI to enhance its product offerings, particularly in the areas of video call learning experiences and content expansion for math and music courses.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.