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On Thursday, Scotiabank (TSX:BNS) analyst Nat Schindler revised the price target for Duolingo Inc. (NASDAQ:DUOL) upward to $600 from the previous $470, while maintaining a Sector Outperform rating on the company’s shares. The stock, currently trading near $524, has delivered an impressive 167% return over the past year. The adjustment comes as Schindler acknowledges Duolingo’s success in growing its daily active user (DAU) base and its ability to increase monetization efforts. InvestingPro data shows the company has maintained strong revenue growth of 39% in the last twelve months.
According to Schindler, the market has yet to fully recognize the fundamental changes occurring within Duolingo. The analyst’s bridge analysis, which considers macroeconomic factors and user-level data, anticipates a continued rise in the ratio of DAUs to monthly active users (MAUs) through 2027. Supporting this optimistic outlook, InvestingPro data reveals impressive gross profit margins of 72.25% and a healthy current ratio of 2.68, indicating strong operational efficiency and financial stability. A particular product, Max, though still in its early stages, is showing potential as a significant contributor to average revenue per user (ARPU) with increasingly favorable economics.
A recent decision by Apple (NASDAQ:AAPL) in May 2025 to change its App Store policies is seen as a pivotal development for Duolingo. Schindler suggests that this ruling could lead to a substantial increase in EBITDA over time. The analyst posits that if Duolingo users begin to adopt alternative payment methods off-platform, it could result in up to an 850-basis-point expansion in margins by 2026, a prospect not currently accounted for in consensus estimates.
Schindler’s analysis also points to Duolingo’s momentum in in-app purchases (IAP) and the advantages of scaling fixed costs. These factors, combined with the easing of platform constraints and a solid forecast, position Duolingo for a potential multi-year elevation in earnings. While trading at a relatively high P/E ratio of 239, InvestingPro analysis suggests the stock is currently overvalued compared to its Fair Value estimate. The analyst concludes that with a deepening engagement base and an increasingly favorable operational setup, Duolingo’s financial outlook appears promising. For deeper insights into Duolingo’s valuation and 20+ additional ProTips, including detailed financial health metrics, check out the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Duolingo Inc. reported impressive financial results for the first quarter of 2025, surpassing analysts’ expectations with an earnings per share of $0.72 against a forecast of $0.52, and revenue reaching $230.7 million, exceeding the anticipated $223.15 million. This strong performance has prompted analysts to adjust their outlooks, with Scotiabank raising its price target for Duolingo from $405 to $470, citing the company’s robust financial metrics and upgraded full-year guidance. DA Davidson also increased its price target to $470, maintaining a Buy rating following Duolingo’s better-than-expected revenue and adjusted EBITDA results.
JPMorgan reiterated its Overweight rating with a $500 target, emphasizing Duolingo’s potential for sustained user growth, supported by a vast market opportunity among global language learners. Duolingo’s expansion into new courses and subjects, including the upcoming launch of a Chess course, is part of its strategy to diversify its offerings and enhance user engagement. The company has also reported significant growth in its user base, with paid subscribers up by 40% and daily active users increasing by 49%.
Management highlighted that the company’s gross margin remained strong at approximately 71%, with an adjusted EBITDA margin reaching a record 27.2%, aided by efficiencies from AI technologies. Despite broader economic concerns, Duolingo expressed confidence in its ability to sustain growth, leveraging its global reach and value-to-cost ratio. As the company continues to invest in AI-driven product development, analysts remain optimistic about Duolingo’s growth prospects and market position.
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