Duolingo (DUOL) stock plunged about 30% on Thursday despite posting better-than-expected third-quarter earnings and revenues. However, investors’ negative reaction is due to the language-learning company’s lower-than-expected Q4 bookings, signaling a growth slowdown in the months ahead. Adding to the pressure, a couple of five-star analysts downgraded DUOL stock to Hold, citing concerns about DUOL’s growth.
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For the current quarter, Duolingo expects bookings between $329.5 million and $335.5 million, below Wall Street’s $344.3 million forecast. Adjusted EBITDA also missed expectations.
That cautious tone overshadowed the company’s impressive performance, including a 36% increase in daily active users and a 34% rise in paid subscribers.
Here’s Why Analysts Downgraded DUOL Stock
KeyBanc analyst Justin Patterson downgraded Duolingo stock to Hold from Buy. The analyst said Duolingo’s efforts to grow users and improve conversions have not delivered yet, as shown by weak Q4 bookings guidance.
While long-term growth may benefit from the company’s focus on better teaching tools, Patterson expects lower bookings and profits in the near term to weigh on the stock’s valuation.
At the same time, Citizens JMP analyst Andrew Boone cut the stock’s rating to Hold, saying he sees no clear catalyst for user growth. The Top analyst noted Duolingo’s product changes are small tweaks that bring only modest improvements.
Is Duolingo a Good Stock to Buy?
On TipRanks, DUOL stock has received a Moderate Buy consensus rating, with eight Buys, 11 Holds, and one Sell assigned in the last three months. The average Duolingo stock price target is $313.21, suggesting an upside potential of 68.76% from the current level.
