On Friday, Piper Sandler maintained a positive outlook on Duolingo Inc. (NASDAQ:DUOL), reiterating an Overweight rating with a steady price target of $271.00. The firm's confidence in Duolingo stems from a recent meeting with the company's Chief Financial Officer, which provided insights into the language-learning platform's strategic priorities and growth opportunities.
Duolingo's potential for growth is seen in the expansion of its primary language offerings, specifically aimed at English learners who make up nearly half of its daily active users. The company is also focusing on enhancing its GenAI-powered Duolingo Max, broadening family plan options, and creating a more distinct experience between Duolingo Max and Duolingo Super.
Piper Sandler highlighted Duolingo's early investment in artificial intelligence (AI) as a key factor in its continued success. The application of AI across various aspects of the business, such as user engagement, course placement, content personalization, notification systems, and content creation, is expected to further drive the company's growth.
The firm's analysis suggests that Duolingo's comprehensive use of AI positions it to significantly benefit from advancements in this technology. The language-learning platform's ability to integrate AI into multiple facets of its operations is anticipated to contribute to its upward trajectory.
In other recent news, Duolingo Inc. has seen a significant increase in daily active users, with growth rates exceeding 50% for an upcoming period. This was highlighted in the company's second-quarter performance report, which also indicated KeyBanc's maintenance of a Sector Weight rating on the language learning platform.
Despite the surge in user growth, KeyBanc expressed caution regarding the sustainability of such growth rates into 2025, given the substantial net additions required.
Duolingo has also introduced a new product, Max, currently available in five courses across 27 countries, with plans for it to be accessible in most countries by year-end on both Android and iOS platforms.
The full financial impact of this product is expected to materialize by 2025. The company has also noted robust user engagement, with 7 million users maintaining a daily streak for a year or longer, and has raised its bookings growth expectations to over 30% for this year.
KeyBanc has increased its estimates for Duolingo's earnings before interest, taxes, depreciation, and amortization (EBITDA) for the years 2024 and 2025 by 6% and 11%, respectively, and introduced a projection for the company's 2026 EBITDA at $360 million. Duolingo is also expanding into new educational fields such as math and music as part of its growth strategy.
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