Duolingo Inc (NASDAQ: DUOL) posted a strong third-quarter, with revenue increasing 40% and profit margins expanding rather significantly on a year-over-year basis.
Still, the online language learning platform opened nearly 25% down on Thursday morning.
Investors are reacting mostly to the company’s Q4 bookings estimate that came in shy of analysts’ forecast as the management said it now plans on focusing on user experience and long-term growth at the expense of near-term monetization.
However, the DUOL stock price decline on Nov. 6 is largely overdone and presents an opportunity for long-term investors to get into a quality name at a deep discount, according to Raymond James analyst Alexander Sklar.
Raymond James’ stance on Duolingo stock
In his research note, Sklar agreed the announced shift in focus means uncertainty in the near-term.
However, it also confirms that management’s growth ambitions are “far grander” than previously thought – which makes Duolingo stock an exciting long-term buy at current levels, he told clients.
Sklar interprets the decision to reinvest in user engagement – especially in underpenetrated markets like Asia – as a sign that management is playing a longer game.
Rather than chasing short-term revenue spikes, the company is laying the groundwork for durable growth and global scale – to preemptively get ahead of Google Translate that many believe lacks features at present, but could pose a meaningful threat to DUOL in the long run.
AI enhancements could drive DUOL shares higher
Duolingo’s strategic embrace of artificial intelligence (AI) is quietly reshaping its growth narrative.
By layering intelligent features, including guided video calls, adaptive math and music modules, and gamified chess, into its core language platform, the company is deepening user engagement and extending session duration – two critical levers for lifetime value.
These aren’t just cosmetic improvements; they’re a shift toward a much more immersive, multi-disciplinary learning ecosystem, which could translate into higher lifetime value per user.
While Q4 bookings guidance came in light today, management’s bet on long-term user retention over short-term monetization suggests a deliberate move to build platform stickiness.
In markets like Asia, where monetisation continues to lag but user growth is explosive, AI-powered personalization could be the key to unlocking scale.
For investors, this evolving product moat may justify a premium multiple for DUOL shares – even amid near-term volatility.
How Wall Street recommends playing Duolingo
Following the post-earnings plunge, Duolingo shares are down roughly 65% versus their year-to-date high – representing a much more compelling valuation to initiate a new position.
According to Barchart, options traders also seem to be pricing in significant recovery in DUOL to about $233 by mid-January.
Plus, Wall Street analysts are against throwing in the towel on Duolingo Inc as well. The consensus rating on it remains at “overweight” with the mean target of $378 indicating potential for a 100% rally from here.
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