Duolingo Stock Gains Investor Interest

Duolingo, Inc. (DUOL) has recently become one of the most searched stocks on Zacks.com. Investors are keen to understand the factors that could influence its stock performance in the near future.

Over the past month, Duolingo's shares have declined by 4.4%, contrasting with the Zacks S&P 500 composite's 2.5% increase. The Zacks Technology Services industry, which includes Duolingo, has seen a 0.9% rise during this period. The primary question remains: what direction will the stock take in the short term?

While media reports or rumors can cause immediate stock price changes, fundamental factors like changes in earnings projections ultimately drive investment decisions. Zacks focuses on evaluating these changes to determine a stock's fair value.

Duolingo is expected to report earnings of $0.72 per share for the current quarter, a 46.9% increase year-over-year. Over the last 30 days, the Zacks Consensus Estimate has decreased by 1.8%. For the current fiscal year, the consensus earnings estimate of $3.16 indicates a 68.1% increase from the previous year.

Zacks' proprietary stock rating tool effectively uses earnings estimate revisions to provide a clearer picture of a stock's short-term price direction. Duolingo is rated Zacks Rank #2 (Buy), reflecting recent changes in consensus estimates and other related factors.

Understanding Duolingo's potential revenue growth is also crucial. The consensus sales estimate for the current quarter is $260.52 million, indicating a 35.3% year-over-year increase. Duolingo has exceeded consensus EPS estimates three times in the last four quarters and consistently surpassed revenue estimates.

Duolingo is rated D on valuation, suggesting it is trading at a premium compared to its peers. This indicates the stock may be overvalued. Zacks Rank #2 suggests Duolingo could outperform the broader market in the near term.