Updated Aug 7 at 6:02pm ET.
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Wells Fargo slightly lowered its price target for the company to $80. This is a cautious view, as the stock currently trades around $126 and the average target from all analysts is about $116.
While the firm did not change its overall rating, this lower target suggests they see more risk than their peers. It is a sign that some analysts remain skeptical about how quickly the company can turn its massive user base into higher profits.
Source: Wells Fargo
Barclays raised its price target for the company from $110 to $115. This is a minor adjustment that keeps their outlook roughly in line with the average analyst target of $116. The firm kept its rating at Equal Weight, which is a neutral stance. This suggests they believe the stock is currently priced about where it should be, balancing the company's strong user growth against the high expectations already built into the stock price.
Source: Barclays
Duolingo reported earnings of 66 cents per share, which was higher than the 60 cents analysts expected. Revenue hit 300 million dollars for the quarter, matching what the company had previously predicted. The most encouraging sign was that daily active users, people who use the app every single day, grew by 23 percent compared to last year. This suggests the app is becoming a deeper habit for more people, which is the engine that eventually drives subscription sales.
However, the stock fell about 17 percent because the company's forecast for the next three months came in lower than Wall Street was looking for. Management is prioritizing user growth and engagement over immediate sales, betting that a more addicted user base will pay off later. For long-term owners, the core business looks healthy, but the lower forecast shows that turning those free users into paying subscribers might happen a bit slower than people hoped.
B of A Securities downgraded Duolingo to Underperform, which is essentially a sell rating. This move signals that the firm expects the stock to perform worse than the average return of the market over the coming months.
The downgrade comes as the stock trades at roughly $136, which is significantly higher than the average analyst price target of $109. When a stock price climbs well above what analysts believe the business is worth, it often leads to these types of rating cuts as firms conclude the shares have become too expensive relative to the company's actual earnings potential.
New data from China Beige Book, a firm that tracks the Chinese economy, shows weakening consumer spending and a general slowdown. While Duolingo is a global platform, it has identified China as a key market for its English-learning products.
If Chinese consumers pull back on discretionary spending, it could make it harder for the company to convert free users into paid subscribers in that region. We are watching this because international expansion is a core part of the company's plan to grow its total user base and revenue.
Source: CNBC Television
Analysts adjusted their price targets following the company's recent earnings report and weak revenue forecast. Only 7 of 23 analysts recommend buying the stock, and the average target of $116 sits 12% below the current price.
The company has a habit of clearing the bars set for it, beating profit expectations in seven of the last eight quarters. This suggests management is conservative with its targets.
| Expectation | |
|---|---|
| EPS | $0.58 |
| Revenue | $303M |
