On Monday, Evercore ISI maintained its Outperform rating on Duolingo Inc. (NASDAQ:DUOL) with a steady price target of $335.00. The firm anticipates that Duolingo will likely exceed third-quarter expectations, suggesting a modest beat and at least meeting the upper end of the guidance.
Based on intra-quarter data points, there is a slight potential for surpassing Wall Street's third-quarter revenue and bookings estimates, which predict year-over-year growth of 37% and 28%, respectively. Bookings are expected to be slightly higher than the top-end guidance, with low single-digit percentage growth.
The analysis also indicates a probable upside to the market's third-quarter Monthly Active Users (MAU) growth estimate, which suggests a 5% sequential increase, equating to approximately 5.5 million net additions. However, third-party traffic trends hint at an 8% quarter-over-quarter MAU growth.
Looking ahead to the fourth quarter, the current market bookings forecast aligns with historical trends, and the revenue growth estimate is deemed achievable, though not conservative. The estimate for MAU net additions of 5.8 million for the fourth quarter is also seen as potentially reachable.
Evercore ISI forecasts Duolingo's third-quarter revenue to come in at $189 million, marking a 37% increase year-over-year and aligning closely with both the Street's expectations and the higher end of management's guidance, which ranges from $186.7 million to $189.7 million. The firm's EBITDA estimate stands at $42.1 million, translating to a 22.3% margin. This estimate is in line with the Street's projections and skews towards the upper end of management's guidance of $40.1 million to $42.7 million.
Duolingo is set to report its third-quarter results on November 6th, and market participants are keen to see if the company's performance aligns with Evercore ISI's projections. The firm's analysis suggests that Duolingo's growth trajectory is on a solid path, with the potential to meet or exceed key financial metrics for the upcoming quarterly report.
In other recent news, Duolingo Inc. has experienced significant developments in its financial outlook and business operations. Goldman Sachs (NYSE:GS) has increased its price target for Duolingo to $250, citing positive user engagement and the introduction of Duolingo Max. However, JMP Securities downgraded the company's stock from 'Market Outperform' to 'Market Perform', despite the company's potential to surpass consensus estimates.
Other firms like Evercore ISI, Needham, and JPMorgan (NYSE:JPM) have raised their price targets for Duolingo, citing strong growth prospects and the unveiling of AI-driven features. The company's recent product enhancements, including Video Calls and Adventures, are expected to improve user experience and engagement. JPMorgan projects significant growth in Duolingo's Max paid subscriptions, estimating revenues of $44.3 million in 2024 and $134.2 million in 2025.
InvestingPro Insights
Duolingo's strong market position, as highlighted in the article, is further supported by recent InvestingPro data. The company's revenue growth remains robust, with a 43.42% increase in the last twelve months as of Q2 2024, surpassing $634 million. This aligns with Evercore ISI's expectations of continued growth and potential to exceed third-quarter estimates.
InvestingPro Tips reveal that Duolingo's net income is expected to grow this year, and analysts anticipate sales growth in the current year. These tips corroborate the positive outlook presented in the article and suggest that the company's financial performance may indeed meet or exceed expectations in the upcoming earnings report.
The company's impressive gross profit margin of 73.31% underscores its operational efficiency, which could contribute to the potential EBITDA beat mentioned in the analysis. Additionally, Duolingo's strong return over the last three months, with a price total return of 81.27%, reflects investor confidence in the company's growth trajectory.
For investors seeking a more comprehensive analysis, InvestingPro offers 16 additional tips for Duolingo, providing deeper insights into the company's financial health and market position.
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