Duolingo positives now priced in – JMP Securities

Duolingo (NASDAQ:) was cut to Market Perform from Market Outperform by JMP Securities analysts, who also removed the firm’s price target on the stock in a note to clients Wednesday.

The analysts told investors that DUOL shares are now trading 8% ahead of their prior $155 price target after gaining 96% YTD and 24% since reporting earnings on May 9.

“While we continue to believe Duolingo deserves a premium valuation given its large TAM, strong execution as it has accelerated MAU and DAU growth for seven consecutive quarters, and its freemium model gives us confidence that it can take the majority share of language learning spend over time, we believe these characteristics are now priced in with shares trading at 11.8x our 2024E revenue,” they wrote.

“Our blue sky scenario, with 40% compounding revenue growth over the next three years, suggests Duolingo trades for 7x 2025E revenue and 31x 2025E EBITDA.”

The analysts stated that DUOL’s annual subscriber retention remains at 40%, while overall churn has improved as 91% of subscribers are now on family or annual plans.