Bank of America Securities analyst Curtis Nagle reiterated a Hold rating on Duolingo (DUOL – Research Report) today and set a price target of $375.00.
Curtis Nagle has given his Hold rating due to a combination of factors influencing Duolingo’s financial outlook. Despite the company reporting strong quarterly results that exceeded market expectations in terms of revenue and subscriber growth, there are concerns about the impact of increased investments in artificial intelligence on future profitability. The anticipated growth in daily active users and the successful adoption of premium subscription tiers are positive indicators, yet the associated costs are expected to weigh on margins in the near term.
Moreover, while the revenue guidance for the upcoming fiscal year is slightly above market consensus, the expected EBITDA margins are projected to be lower due to the front-loaded nature of AI-related investments. These investments, aimed at enhancing the Max tier adoption, are likely to create short-term margin pressure, although they may yield benefits in the longer term. Consequently, Nagle’s Hold rating reflects a cautious stance, balancing the company’s growth potential with the immediate financial challenges posed by its strategic investments.
In another report released today, Barclays also maintained a Hold rating on the stock with a $330.00 price target.
Based on the recent corporate insider activity of 114 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of DUOL in relation to earlier this year.