JPMorgan Downgrades Duolingo, Recommends Buying on Selloff

JPMorgan analyst Bryan Smilek lowered Duolingo's price target to $500 from $580 and maintained an Overweight rating. The stock has fallen 30% since May 14 due to concerns about user growth deceleration and subscription bookings growth slowdown. Despite this, JPMorgan remains positive on Duolingo's leadership position and recommends buying the stock on the selloff.

JPMorgan analyst Bryan Smilek has lowered Duolingo Inc.'s (NASDAQ:DUOL) price target to $500 from $580, maintaining an Overweight rating ahead of the company's second-quarter earnings report scheduled for Wednesday, August 6. The stock has fallen 30% since its May 14 peak, significantly underperforming the S&P 500's 6% gain during the same period. The selloff is attributed to investor concerns about decelerating user growth and subscription bookings, along with increased churn in the company's premium Max subscription tier [1][2].

Third-party data from Sensor Tower indicates Duolingo's second-quarter global daily active user (DAU) growth reached 39% year-over-year, down from 51% in the first quarter. The data shows a gradual slowdown throughout the quarter, with June growth at 37%, May at 40%, and April at 41% [1][2]. JPMorgan has trimmed its DAU estimates by approximately 1-4% through the second to fourth quarters of 2025, now projecting year-over-year DAU growth of 42% in Q2, 39% in Q3, and 40% in Q4. The firm notes that investors are looking for second-quarter DAU growth of 40-42%, toward the lower end of management’s 40-45% guidance [1][2].

Despite these adjustments, JPMorgan remains positive on Duolingo's long-term prospects, citing its leadership position in the language learning market. The company maintains strong financial health with impressive gross margins of 72% and revenue growth of 39%. InvestingPro subscribers can access 15+ additional key insights and detailed financial metrics about Duolingo’s growth potential. The firm highlighted 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][2].

Recent developments include JPMorgan raising its price target for Duolingo to $580, citing strong growth and effective user conversion strategies. The analysts anticipate over 20% growth in bookings and revenue for the company. Evercore ISI also increased its price target to $540, highlighting Duolingo’s competitive advantages and market leadership in online language learning. Conversely, DA Davidson lowered its price target to $500, although it noted that Duolingo’s user growth is surpassing expectations. Additionally, Duolingo held its 2025 Annual Meeting of Stockholders, where shareholders approved board nominees and Deloitte & Touche LLP as the company’s auditor. Meanwhile, Duolingo’s stock faced pressure following Apple (NASDAQ:AAPL)’s announcement of a new Live Translation feature, which could introduce competition in language services. Despite this, Duolingo continues to demonstrate robust growth and investor interest, as evidenced by the recent analyst ratings and shareholder support [1][2].

References:
[1] https://www.investing.com/news/analyst-ratings/duolingo-stock-price-target-lowered-to-500-by-jpmorgan-on-user-growth-concerns-93CH-4139257
[2] https://za.investing.com/news/analyst-ratings/duolingo-stock-price-target-lowered-to-500-by-jpmorgan-on-user-growth-concerns-93CH-3792874