Key Stats for Duolingo Stock
- Past-Month Performance: -20%
- 52-Week Range: $112 to $545
- Valuation Model Target Price: $174
- Implied Upside: 46%
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What Happened?
Duolingo, Inc. stock fell about 20% over the past month, sliding to around $122 per share, as investors pulled back following a sharp valuation reset and heavy institutional repositioning. Shares declined steadily through the month, reflecting pressure from large holders reducing exposure rather than a single negative company-specific headline.
The stock moved lower this month as institutional selling and multiple compression weighed on shares, not because of new operating deterioration.
Several investors sharply reduced positions in the third quarter, including Great Lakes Advisors, which cut its stake by 49.3%, and STRS Ohio, which reduced its holding by 72.8%.
Larger managers also trimmed exposure, with Baillie Gifford cutting its stake by 28.6% and Federated Hermes reducing its position by 51.3%, adding sustained selling pressure as disclosures were absorbed by the market.
Recent filings showed the activity was not entirely one-sided. Y Intercept Hong Kong Ltd increased its Duolingo stake by 37.8%, while several long-term holders maintained sizable core positions despite the drawdown.
That mix of aggressive trims and selective accumulation helps explain why shares stabilized near the lower end of the range rather than continuing to fall sharply.
Looking ahead, focus has shifted to upcoming catalysts. This month, Duolingo confirmed it will announce fourth-quarter and full-year 2025 results on February 26, 2026, after the U.S. market closes, followed by a live webcast at 5:30 p.m. ET.
The recent pullback reflects growing caution around near-term expectations, with investors waiting to see whether earnings and guidance can reestablish confidence in subscriber monetization and margin expansion.
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Is Duolingo Undervalued?
Under valuation assumptions, the stock is modeled using:
- Revenue Growth (CAGR): 26%
- Operating Margins: 16%
- Exit P/E Multiple: 16x
Revenue growth reflects Duolingo’s continued expansion beyond pure user acquisition, with a growing share of revenue coming from paid subscriptions and higher monetization per learner.
While overall user growth remains healthy, the more important shift has been toward converting free users into paying subscribers, which supports faster revenue growth without a proportional increase in costs.
Earnings potential increasingly depends on monetization depth rather than headline user growth alone. Improvements in premium features, family plans, and AI-powered personalization tools support higher average revenue per user while reinforcing retention, helping subscription revenue compound over time.
This supports the view that future returns are driven by operating leverage rather than aggressive expansion spending.
Duolingo’s content library and platform scale allow incremental revenue to flow through at higher margins as product development and marketing costs grow more slowly than revenue.
Based on these inputs, the valuation model estimates a target price of $174, implying about 46% total upside over roughly 1.9 years, indicating the stock appears undervalued at current prices.
Results over the next year hinge on execution across several higher-impact areas. Paid subscriber growth remains central, as continued adoption of premium tiers and AI-driven learning enhancements can meaningfully lift revenue per user while extending engagement.
At current levels, Duolingo appears undervalued, with future performance driven by sustained subscriber monetization, improving operating leverage, and product-led efficiency rather than a need for user growth to reaccelerate.
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