Duolingo stock is rising today, November 4, as investors react to an earnings report showing that revenue growth accelerated last quarter. DUOL climbed to $147, up 15% from its lowest point this week. So, will these gains hold, or is this a dead-cat bounce?
Duolingo’s business continued growing despite AI disruption
DUOL stock has been in a steep downtrend over the past few months as investors weighed the potential disruption from artificial intelligence (AI) tools. It also fell after the company shifted its focus away from profitability and toward user and revenue growth.
There are signs that Duolingo’s business is doing well. Its earnings report showed that its daily active users soared to 64.9 million, up by 29% from a year earlier. The number of paid subscribers also continued rising, reaching 13.1 million, up by 14% from a year earlier.
Duolingo’s revenue rose by 14% to $309 million, with its bookings hitting 316 million. The company made a net income of $27.2 million, giving it a net profit margin of 8.8%. Its revenue and user growth was partly due to its partnerships, including with games like Brawl Stars and Eggy Party.
Duolingo stock also jumped as the company published its share repurchase data. It repurchased shares worth about $6.4 million as part of its $400 million program announced in February.
The management expects the company’s growth to continue in the fourth quarter. It expects that its revenue will be $382 million, much higher than the $321 million that analysts were expecting. Even the most optimistic analyst expected the revenue to hit $331 million.
For the year, the company expects revenue to be $1.29 billion, much higher than the expected $1.22 billion. The same is true with the adjusted EBITDA, which is expected to jump to $84 million and $323 million.
Analysts are relatively bullish about Duolingo shares. Evercore’s Mark Mahaney reiterated his outperform rating, while Goldman Sachs’ Eric Sheridan hiked his target from $114 to $135. Morgan Stanley’s Nathan Feather hiked the target of $140. The other highly optimistic analysts are from DA Davidson and Wedbush.
Duolingo stock price analysis
DUOL stock chart | Source: TradingView
The daily chart shows that the Duolingo stock has been in a downward trend in the past few weeks. It dropped from $167 in September to a low of $128 before its earnings report on Tuesday.
Before the retreat, the stock was forming a megaphone pattern. This pattern normally leads to more upside over time. Therefore, the most likely scenario is where the stock continues rising, potentially to the key resistance level of $167.
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