Duolingo (DUOL) Stock Forecast & Price Target

Duolingo Inc. demonstrated robust growth in key financial metrics, with adjusted EBITDA rising to $52.3 million, an increase of $17.1 million year-over-year, driven by operational leverage and strong revenue performance. The company reported a remarkable 38.8% year-over-year revenue growth, alongside a significant increase in daily active users (DAUs) who reached 40.5 million, up 50.6% year-over-year. Additionally, Duolingo's successful conversion of free to paid subscribers was highlighted by a total of 9.5 million paid subscribers, exceeding consensus estimates, and a healthy pipeline suggested by strong monthly active user (MAU) growth of 32% year-over-year, indicating continued momentum in user engagement and monetization potential.

Duolingo Inc. is facing a significant slowdown in Daily Active User (DAU) growth, anticipated to be around 45% in the first quarter of 2025 and likely to decelerate further in the second quarter, which negatively impacts subscription growth projections. Fiscal year 2025 guidance indicates revenue growth of 29.7% year-over-year at the midpoint, but adjusted gross margins have declined to 71.9%, falling short of expectations and down from 73.1% a year prior. Additionally, an increasing reliance on Duolingo Max is expected to dilute gross margins in the near term, alongside potential challenges posed by discretionary spending headwinds affecting direct-to-consumer models.