Duolingo Expects Q2 Bookings to Beat Expectations, Guidance Likely Conservative

Duolingo shares have fallen 24% in the past month amid concerns over slowing growth and rising churn. Despite strong global brand momentum, JP Morgan analyst Bryan M. Smilek expects the company to announce Q2 bookings beating guidance. Smilek has trimmed DAU forecasts but remains bullish, citing Duolingo's leadership in a largely untapped global market and potential for growth driven by new products and marketing efforts. He projects Duolingo's adjusted EBITDA margins to improve significantly in the second half of the year and expects the company to raise its full-year outlook.

Duolingo Inc. (NASDAQ:DUOL) has seen its stock price fall by 24% over the past month, driven by concerns over slowing user growth and increasing churn in its premium subscription tier. The decline comes despite the company's strong global brand and market leadership in online language learning.

JPMorgan analyst Bryan M. Smilek has recently lowered his price target for Duolingo to $500 from $580, citing concerns about user growth and subscription bookings. Smilek maintains an Overweight rating on the stock ahead of the company's second-quarter earnings report, scheduled for August 6 [1].

The slowdown in user growth is evident in third-party data from Sensor Tower, which shows Duolingo's second-quarter global daily active user (DAU) growth at 39% year-over-year, down from 51% in the first quarter. The data indicates a gradual slowdown throughout the quarter, with June growth at 37%, May at 40%, and April at 41% [1].

Despite the concerns, Smilek remains bullish on Duolingo's long-term prospects. He projects the company's adjusted EBITDA margins to improve significantly in the second half of the year and expects Duolingo to raise its full-year outlook. Smilek also notes that Duolingo's approximately 130 million monthly active users represent only about 18% of global online language learners and 7% of all global language learners, suggesting significant room for expansion [1].

The upcoming earnings report will be closely watched by investors. Duolingo is forecasted to report an EPS of $0.55, showcasing a 7.84% upward movement from the corresponding quarter of the prior year. The company's revenue is expected to be $240.53 million, indicating a 34.88% growth compared to the corresponding quarter of the prior year [2].

Investors should also keep an eye on recent revisions to analyst forecasts, which can reflect the latest near-term business trends. As of July 2, Duolingo is a Zacks Rank #4 (Sell), with a Forward P/E ratio of 128 and a PEG ratio of 2.85 [2].

References:
[1] https://za.investing.com/news/analyst-ratings/duolingo-stock-price-target-lowered-to-500-by-jpmorgan-on-user-growth-concerns-93CH-3792874
[2] https://finance.yahoo.com/news/duolingo-inc-duol-rises-higher-214505291.html