Duolingo (NASDAQ: DUOL) shares have staged a notable recovery from their 2024 lows, climbing roughly 47% from an April trough of $89.70 to trade near $132. Despite this rebound, the stock remains down 25% year-to-date and has shed approximately 75% from its all-time high, with market capitalization shrinking from $24.12 billion to $6.2 billion.
The language-learning platform is navigating a challenging environment as artificial intelligence tools threaten to disrupt its core business model. In response, management has signaled a strategic pivot away from near-term revenue maximization toward long-term user growth. The company is also expanding into adjacent verticals including chess, math, and music, while rolling out video call features to a broader audience and streamlining subscription processes.
First-quarter results showed continued momentum: daily active users rose 21% year-over-year to 56.5 million, and paid subscribers grew at the same pace to 12.5 million. Duolingo has set an ambitious target of reaching 100 million users by 2028. Revenue for the quarter increased 27% to $292 million, and net income improved to $43 million from $35.1 million in the prior-year period.
However, Wall Street anticipates a significant growth deceleration. Consensus estimates project second-quarter revenue of $295 million, representing a 17% year-over-year increase — down sharply from the 27% growth rate in Q1. For the full year, analysts forecast revenue of $1.21 billion, up 16% from 2023, compared with nearly 40% growth last year. The slowdown is expected to continue into 2025, with revenue growth projected at 13%.
Earnings per share are forecast to decline substantially, from $11.77 in 2023 to $6.69 this year, reflecting the impact of increased investment in user acquisition and product development.
Despite the deceleration, analysts remain broadly bullish. JPMorgan's Bryan Smilek raised his price target from $94 to $125, while Morgan Stanley and Jefferies both set targets at $125. Wedbush has a $139 target, and the consensus estimate stands at $150. The stock currently trades at roughly 20 times forward earnings, a discount to its historical multiple.
Technical indicators suggest caution. The daily chart shows Duolingo trading within an ascending channel but still below its 100-day moving average. The Relative Strength Index has formed a descending channel, signaling bearish divergence, while the Percentage Price Oscillator continues to decline. A bearish flag pattern has also emerged, raising the possibility of a downside breakout, particularly as the company prepares to release its next earnings report.
Investors may also want to monitor broader market trends. For context, recent Dow gains have been tempered by sector-specific headwinds, and Uber's sharp decline highlights how growth slowdowns can weigh on high-multiple stocks.
Duolingo's ability to sustain its user growth trajectory while fending off AI competition will be critical. The upcoming quarterly report will provide key signals on whether the recent stock recovery is sustainable or merely a pause before further declines.
This article is for informational purposes only and does not constitute financial advice.
