Duolingo (NASDAQ:DUOL) Shares Gap Down on Analyst Downgrade

Key Points

• Duolingo shares fell sharply after Bank of America downgraded the stock from Neutral to Underperform and cut its price target from $103 to $93. Shares opened at $125.40, down from the prior close of $135.80.
• Analyst sentiment remains cautious: Duolingo has an average rating of Hold, with 19 Hold ratings, two Buys and two Sells; the average price target is $151.88.
• The company’s latest quarterly results exceeded expectations, with earnings of $0.89 per share and revenue of $291.97 million, up 26.5% year over year. Institutional investors own 91.59% of the stock, while insiders have sold 9,506 shares worth about $1.07 million over the past 90 days.

Duolingo, Inc. (NASDAQ:DUOL - Get Free Report) shares gapped down before the market opened on Tuesday after Bank of America downgraded the stock from a neutral rating to an underperform rating. The stock had previously closed at $135.80, but opened at $125.40. Bank of America now has a $93.00 price target on the stock, down from their previous price target of $103.00. Duolingo shares last traded at $132.8050, with a volume of 407,486 shares changing hands.

Several other research analysts have also recently weighed in on the stock. Zacks Research upgraded shares of Duolingo from a "strong sell" rating to a "hold" rating in a research report on Tuesday, April 28th. DA Davidson reiterated a "neutral" rating and set a $120.00 target price on shares of Duolingo in a research report on Monday, June 29th. Scotiabank reissued a "sector perform" rating and issued a $130.00 price target on shares of Duolingo in a research note on Tuesday, July 28th. UBS Group reissued a "neutral" rating on shares of Duolingo in a report on Wednesday, June 17th. Finally, Wedbush assumed coverage on shares of Duolingo in a research report on Thursday, July 16th. They set a "neutral" rating and a $139.00 price objective on the stock. Two research analysts have rated the stock with a Buy rating, nineteen have assigned a Hold rating and two have issued a Sell rating to the stock. Based on data from MarketBeat.com, the company presently has an average rating of "Hold" and an average target price of $151.88.

Insiders Place Their Bets

In related news, insider Robert Meese sold 1,420 shares of Duolingo stock in a transaction on Friday, May 15th. The shares were sold at an average price of $112.16, for a total value of $159,267.20. Following the transaction, the insider owned 170,745 shares in the company, valued at $19,150,759.20. This trade represents a 0.82% decrease in their position. The sale was disclosed in a document filed with the Securities & Exchange Commission, which is available through the SEC website. The sale was made to cover tax withholding obligations related to the vesting of equity awards. Also, insider Natalie Glance sold 3,360 shares of the company's stock in a transaction dated Monday, May 18th. The shares were sold at an average price of $113.59, for a total transaction of $381,662.40. Following the sale, the insider owned 173,401 shares of the company's stock, valued at approximately $19,696,619.59. The trade was a 1.90% decrease in their ownership of the stock. The disclosure for this sale is available in the SEC filing. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. The sale was made to cover tax withholding obligations related to the vesting of equity awards. Over the last ninety days, insiders have sold 9,506 shares of company stock valued at $1,073,864. 16.62% of the stock is currently owned by corporate insiders.

Institutional Investors Weigh In On Duolingo

A number of hedge funds and other institutional investors have recently modified their holdings of the stock. Root Financial Partners LLC increased its stake in Duolingo by 194.1% in the 1st quarter. Root Financial Partners LLC now owns 250 shares of the company's stock worth $25,000 after purchasing an additional 165 shares during the period. EFG International AG bought a new stake in Duolingo in the fourth quarter valued at approximately $26,000. AlphaCentric Advisors LLC purchased a new stake in shares of Duolingo during the fourth quarter valued at approximately $33,000. Banque Cantonale Vaudoise boosted its stake in shares of Duolingo by 51.1% during the first quarter. Banque Cantonale Vaudoise now owns 340 shares of the company's stock valued at $34,000 after purchasing an additional 115 shares during the period. Finally, FNY Investment Advisers LLC bought a new position in shares of Duolingo in the second quarter worth approximately $34,000. Institutional investors own 91.59% of the company's stock.

Duolingo Trading Down 2.0%

The firm's 50 day moving average is $123.92 and its 200 day moving average is $115.45. The company has a debt-to-equity ratio of 0.07, a current ratio of 2.62 and a quick ratio of 2.62. The company has a market capitalization of $6.20 billion, a PE ratio of 15.38, a P/E/G ratio of 1.03 and a beta of 0.87.

Duolingo (NASDAQ:DUOL - Get Free Report) last announced its quarterly earnings results on Monday, May 4th. The company reported $0.89 earnings per share for the quarter, beating the consensus estimate of $0.79 by $0.10. Duolingo had a net margin of 38.44% and a return on equity of 14.07%. The business had revenue of $291.97 million during the quarter, compared to analysts' expectations of $288.60 million. During the same quarter in the prior year, the company posted $0.72 EPS. The firm's revenue for the quarter was up 26.5% compared to the same quarter last year. As a group, equities analysts predict that Duolingo, Inc. will post 2.81 EPS for the current year.

Duolingo Company Profile

Duolingo, Inc NASDAQ: DUOL is a technology-driven education company that operates a widely used language-learning platform. Founded in 2011 by Luis von Ahn and Severin Hacker, Duolingo offers a freemium service featuring bite-sized lessons, gamified exercises and adaptive learning algorithms. The company's core product is its mobile and web application, which supports instruction in more than 40 languages, ranging from widely spoken tongues such as English and Spanish to lesser-taught options including Irish and Swahili.

In addition to its flagship language courses, Duolingo has expanded its product suite to include the Duolingo English Test, an on-demand, computer-based English proficiency exam designed for academic and professional admissions.

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