Bullish indicating open at $55-$60, IPO prices at $37
On Friday, UBS analyst Chris Kuntarich revised the price target for Duolingo Inc. (NASDAQ:DUOL) shares, reducing it to $400 from the previous $430, while continuing to recommend the stock as a Buy. Kuntarich expressed a positive outlook on Duolingo ahead of the company's first-quarter earnings report, due May 1, citing potential for estimated upside. According to InvestingPro data, the company maintains a "GREAT" financial health score, with multiple positive indicators suggesting strong fundamentals.
Despite a previous dip in investor confidence due to weaker-than-anticipated margin guidance after the fourth-quarter report, Kuntarich remains confident in the company's strategy. The focus on trading near-term EBITDA margin for accelerated EBITDA dollar growth seems prudent as the adoption of Duolingo's Max feature increases. The company's impressive 72.78% gross profit margin and robust revenue growth of 40.84% in the last twelve months support this strategic direction.
Sensor Tower data suggests that Duolingo's daily active user (DAU) growth for the first quarter is on track with forecasts, while bookings data indicates at least a low single-digit percentage increase relative to the guidance. Kuntarich's commentary underscores the analyst's comfort with the current valuation, willing to endorse a 45 times forward year 2026 EBITDA multiple for Duolingo's shares.
The reassurance comes amidst broader market concerns where negative estimate revisions are looming over the small to mid-size internet sector. Kuntarich's stance on Duolingo reflects a belief in the company's relative stability and growth potential, even as the 12-month risk/reward profile appears to be evenly poised.
In other recent news, Duolingo Inc. has been the focus of multiple analyst updates and sector reports. JPMorgan analyst Bryan Smilek maintained an Overweight rating on Duolingo, setting a price target of $360, citing potential for increased monetization and strong daily active user growth. Despite macroeconomic pressures that could affect consumer spending, Smilek anticipates positive first-quarter results in bookings, revenue, and adjusted EBITDA. In contrast, DA Davidson raised Duolingo's price target to $410, highlighting strong user growth and potential upside in consensus estimates. This decision was based on an analysis of course enrollments indicating that Duolingo's daily active user growth is exceeding expectations.
Piper Sandler's report on the Consumer AI sector also mentioned Duolingo as a company poised to benefit from significant growth prospects in AI. The firm anticipates a compound annual growth rate of 46% in the Consumer AI market by 2030, highlighting Duolingo's potential in this expanding sector. Piper Sandler noted that Duolingo is among several public companies well-positioned to leverage AI advancements. Meanwhile, in the gaming industry, DA Davidson reported that AI integration remains in its early stages, with companies like Take-Two Interactive (NASDAQ:TTWO) focusing on enhancing player experiences rather than immediate AI adoption. These developments reflect a dynamic landscape for Duolingo and related sectors, with analysts keeping a close watch on growth opportunities and market conditions.
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