Duolingo (NASDAQ:DUOL) Stock Price Down 16.5% - Here's What Happened

Key Points

• Duolingo shares fell 16.5% after the company’s third-quarter revenue forecast of about $302 million came in below analysts’ $303.9 million consensus, overshadowing second-quarter revenue and adjusted EPS beats.
• Second-quarter revenue rose 18.3% year over year to approximately $298.5 million, while daily active users grew 23%. The company also generated $88.3 million in operating cash flow and held roughly $1.2 billion in cash.
• Investor sentiment remains cautious as net income and EPS declined from a year earlier and Bank of America downgraded the stock to “underperform.” Analysts collectively rate Duolingo “Hold,” with an average price target of $146.47.

Duolingo, Inc. (NASDAQ:DUOL - Get Free Report)'s stock price traded down 16.5% during mid-day trading on Thursday . The stock traded as low as $117.60 and last traded at $113.0260. Approximately 523,162 shares traded hands during trading, a decline of 74% from the average daily volume of 2,026,192 shares. The stock had previously closed at $135.32.

Duolingo News Roundup

Here are the key news stories impacting Duolingo this week:

• Positive Sentiment: Duolingo reported second-quarter revenue of approximately $298.5 million, up 18.3% year over year and ahead of analysts’ expectations. Adjusted earnings of $0.66 per share also exceeded consensus estimates near $0.60-$0.61. Duolingo stock sinks 15% as Q3 revenue forecast misses expectations
• Positive Sentiment: Daily active users increased 23% year over year, supporting management’s strategy of prioritizing engagement and long-term user expansion. Duolingo is targeting 100 million daily active users by 2028. Duolingo outlines 2026 revenue growth of approximately 16%
• Positive Sentiment: Needham reaffirmed its “buy” rating and maintained a $145 price target, implying potential upside from recent trading levels.
• Neutral Sentiment: Duolingo generated $88.3 million in operating cash flow and ended the quarter with approximately $1.2 billion in cash and cash equivalents, providing financial flexibility.
• Negative Sentiment: Third-quarter revenue guidance of about $302 million was below the roughly $303.9 million analyst consensus. Investors viewed the forecast as a sign that near-term monetization may lag user growth. Duolingo's lower-than-expected revenue forecast overshadows quarterly beat
• Negative Sentiment: Second-quarter net income and EPS declined from the prior-year period, while operating profit grew only modestly, reinforcing concerns about slowing profitability growth.
• Negative Sentiment: Bank of America downgraded Duolingo to “underperform,” adding to investor caution around the company’s growth outlook.

Wall Street Analyst Weigh In

Several research firms recently weighed in on DUOL. KeyCorp reiterated a "sector weight" rating on shares of Duolingo in a research note on Thursday, June 4th. Morgan Stanley upped their price target on Duolingo from $95.00 to $125.00 and gave the company an "equal weight" rating in a report on Thursday, July 16th. Barclays raised their price objective on Duolingo from $110.00 to $115.00 and gave the stock an "equal weight" rating in a research report on Thursday. Wedbush initiated coverage on Duolingo in a report on Thursday, July 16th. They set a "neutral" rating and a $139.00 price objective on the stock. Finally, Needham & Company LLC restated a "buy" rating and set a $145.00 price objective on shares of Duolingo in a research report on Thursday. Three investment analysts have rated the stock with a Buy rating, eighteen have assigned a Hold rating and two have given a Sell rating to the company's stock. According to data from MarketBeat, the company presently has an average rating of "Hold" and an average price target of $146.47.

Duolingo Trading Down 8.5%

The firm has a market cap of $5.77 billion, a P/E ratio of 14.24, a price-to-earnings-growth ratio of 1.05 and a beta of 0.87. The company has a current ratio of 2.62, a quick ratio of 2.62 and a debt-to-equity ratio of 0.07. The company's fifty day moving average price is $125.09 and its two-hundred day moving average price is $115.19.

Duolingo (NASDAQ:DUOL - Get Free Report) last posted its quarterly earnings data on Wednesday, August 5th. The company reported $0.66 earnings per share for the quarter, beating the consensus estimate of $0.60 by $0.06. The firm had revenue of $298.45 million during the quarter, compared to analysts' expectations of $295.58 million. Duolingo had a net margin of 38.44% and a return on equity of 14.07%. The company's quarterly revenue was up 18.3% compared to the same quarter last year. During the same quarter last year, the company posted $0.91 EPS. As a group, sell-side analysts predict that Duolingo, Inc. will post 2.81 EPS for the current fiscal year.

Insider Buying and Selling

In related news, insider Robert Meese sold 1,420 shares of the business's stock in a transaction that occurred on Friday, May 15th. The shares were sold at an average price of $112.16, for a total transaction of $159,267.20. Following the completion of the transaction, the insider owned 170,745 shares in the company, valued at approximately $19,150,759.20. The trade was a 0.82% decrease in their ownership of the stock. The sale was disclosed in a document filed with the Securities & Exchange Commission, which can be accessed through this link. 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 that occurred on Monday, May 18th. The shares were sold at an average price of $113.59, for a total transaction of $381,662.40. Following the completion of the sale, the insider directly owned 173,401 shares of the company's stock, valued at $19,696,619.59. The trade was a 1.90% decrease in their position. Additional details regarding this sale are available in the official SEC disclosure. 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. Insiders have sold 9,506 shares of company stock valued at $1,073,864 in the last 90 days. 16.62% of the stock is owned by insiders.

Institutional Inflows and Outflows

Hedge funds and other institutional investors have recently added to or reduced their stakes in the business. Root Financial Partners LLC raised its position in shares of Duolingo by 194.1% during the first 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 acquired a new position in shares of Duolingo in the 4th quarter valued at approximately $26,000. AlphaCentric Advisors LLC acquired a new stake in Duolingo during the 4th quarter worth approximately $33,000. Banque Cantonale Vaudoise raised its holdings in Duolingo by 51.1% during the 1st quarter. Banque Cantonale Vaudoise now owns 340 shares of the company's stock worth $34,000 after buying an additional 115 shares during the period. Finally, FNY Investment Advisers LLC bought a new position in Duolingo in the second quarter valued at approximately $34,000. 91.59% of the stock is currently owned by institutional investors.

About Duolingo

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.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.

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