Key Takeaways
- DUOL shares collapsed more than 20% following management’s decision to prioritize expanding the user base instead of maximizing near-term revenue.
- JPMorgan and Bank of America both cut their ratings to Neutral, with price targets reduced sharply to $95 and $100 respectively.
- Management set an ambitious goal of reaching 100 million daily active users by 2028, acknowledging this will pressure bookings and profit margins.
- The company introduced a $400 million stock repurchase program to stabilize shares through the strategic transition.
- Additional downgrades came from Morgan Stanley and Evercore ISI, reflecting broader Wall Street skepticism about the new approach.
Duolingo (DUOL) experienced a brutal trading session on Friday. Shares plummeted over 20% in morning trading to $90.76 as Wall Street reacted negatively to the language learning company’s announced strategic overhaul.
Executives revealed plans to scale back aggressive monetization tactics in exchange for accelerating user base expansion. The ambitious objective: hitting 100 million daily active users by 2028, a substantial increase from present figures.
This strategic shift was paired with disappointing forward-looking financial projections for 2026, creating the perfect storm for a significant selloff.
Duolingo delivered solid fourth-quarter 2025 results, reporting $0.84 in earnings per share versus analyst expectations of $0.83. Revenue reached $282.9 million, surpassing the consensus estimate of $275.74 million. Yet investors were clearly more concerned about future prospects.
Over the preceding two years, the company had intensified its push for subscription conversions and advertising engagement. While this approach boosted profitability, it simultaneously degraded the free user experience. User acquisition momentum began declining toward the end of 2025.
Management’s solution involves reducing monetization intensity. The platform will emphasize creating a more enjoyable free tier experience, banking on satisfied users to drive organic growth through recommendations.
Artificial intelligence capabilities such as “Video Call with Lily,” which were previously subscription-exclusive, will now be accessible to all users. However, this shift increases operational costs and will compress margins in the immediate future.
Wall Street Turns Bearish
JPMorgan analyst Bryan Smilek downgraded DUOL from Overweight to Neutral while slashing his price objective from $200 down to $95. His rationale centered on the user-first strategy creating headwinds for bookings growth and profitability, with returns from these investments expected to materialize slowly.
Bank of America Securities analyst Omar Dessouky similarly reduced his rating from Buy to Neutral, cutting his target price from $250 to $100. His primary concern focused on Duolingo’s limited advancement in performance marketing capabilities, with management indicating no plans to build out this competency.
BofA characterized this as a strategic misstep, particularly considering the dramatic improvements in advertising targeting technology at platforms like AppLovin and Google. The firm stated that its original investment thesis had been fundamentally challenged.
Morgan Stanley reduced its rating from Overweight to Equalweight. Evercore ISI shifted from Outperform to In Line. KeyBanc maintained its Sector Weight stance.
D.A. Davidson analyst Wyatt Swanson offered a more understanding perspective, noting that previous aggressive monetization tactics had resulted in “disgruntled users and a meaningful negative impact to ‘word-of-mouth’ marketing.”
Buyback Program Launched
In an effort to provide price support during this strategic transformation, Duolingo approved a $400 million stock repurchase program. Management is clearly communicating confidence that shares are trading below intrinsic value.
DUOL has declined approximately 69% over the trailing twelve months. Current prices sit close to the 52-week low.
According to TipRanks, the consensus rating stands at Hold, derived from five Buy ratings, 10 Hold ratings, and one Sell rating. The mean 12-month price target of $139.64 suggests potential upside of roughly 49% from present levels.
The $400 million repurchase authorization continues as the company executes its plan to achieve 2028 user growth objectives.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
