Duolingo (DUOL) Stock: Falls 20% as Five Analysts Downgrade After Pivot

TLDR

• Duolingo stock dropped over 20% after management announced a shift to prioritize user growth over short-term revenue.
• Both JPMorgan and BofA downgraded DUOL to Neutral, slashing price targets dramatically — JPMorgan to $95, BofA to $100.
• The company aims to reach 100 million daily active users by 2028, accepting lower bookings and margin pressure to get there.
• Duolingo authorized a $400 million share buyback program to support the stock during the transition.
• Multiple other firms including Morgan Stanley and Evercore ISI also downgraded the stock, citing slowing growth and strategy concerns.

Duolingo (DUOL) had a rough Friday. The stock tumbled more than 20% in early trading, hitting $90.76, as investors reacted badly to a major strategic pivot announced by management.

Duolingo, Inc., DUOL

The company said it would slow down its efforts to monetize users in favor of growing its daily active user base. The target: 100 million daily active users by 2028, up from current levels.

That announcement came alongside softer-than-expected financial guidance for 2026, which was enough to trigger a broad sell-off.

Duolingo beat Q4 2025 estimates, posting earnings per share of $0.84 against a forecast of $0.83. Revenue came in at $282.9 million, above the expected $275.74 million. But the market was focused on what comes next.

The company has spent the past two years aggressively pushing subscriptions and ad views. That drove profits, but it also made the free experience less enjoyable. User growth started slowing in late 2025.

Management’s answer is to ease up on the monetization pressure. The app will lean into making the free experience more engaging, with the hope that happy users tell their friends.

AI features like “Video Call with Lily,” previously locked behind a paywall, will now be available to all users. That move costs more to run, which will squeeze profit margins in the near term.

Downgrades Roll In

JPMorgan analyst Bryan Smilek downgraded DUOL to Neutral from Overweight, cutting his price target from $200 to $95. He cited the shift toward user growth as a driver of lower bookings and margin pressure, noting the investments will take time to show results.

BofA Securities analyst Omar Dessouky also downgraded the stock to Neutral from Buy, cutting his target from $250 to $100. His main concern: Duolingo made little progress on performance marketing and management said it was unlikely to develop that capability at all.

BofA called this a strategic mistake, especially given how much ad targeting has improved at networks like AppLovin and Google. The firm said its original growth thesis had been disproved.

Morgan Stanley downgraded DUOL from Overweight to Equalweight. Evercore ISI moved it to In Line from Outperform. KeyBanc kept a Sector Weight rating.

D.A. Davidson analyst Wyatt Swanson took a more sympathetic view, writing that earlier monetization efforts had led to “disgruntled users and a meaningful negative impact to ‘word-of-mouth’ marketing.”

Share Buyback Announced

To help support the stock price during the transition, Duolingo authorized a $400 million share buyback program. Leadership is signaling it believes the stock is undervalued at current levels.

DUOL has now fallen roughly 69% over the past year. It is trading near its 52-week low.

The consensus rating on TipRanks sits at Hold, based on five Buys, 10 Holds, and one Sell. The average 12-month price target of $139.64 implies around 49% upside from current levels.

The $400 million buyback authorization remains active as the company works toward its 2028 user growth targets.

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