Duolingo Shares Drop as D.A. Davidson Downgrades to Neutral
Shares of the language-learning app Duolingo fell 3.7% in the morning session after analysts at D.A. Davidson downgraded the stock's rating from 'Buy' to 'Neutral'.
Alongside the downgrade, the brokerage slashed its price target on the language-learning platform's stock by 40%, reducing it from $500 to $300. The firm cited concerns over decelerating active user growth, attributed to minimal social media marketing and increased competition from AI-first alternatives. Despite the significant cut, the new price target still represented a potential 6.1% upside from the stock's previous closing price. The downgrade reflects growing valuation concerns as the company's user expansion begins to slow down.
After the initial drop, the shares recovered some losses and rose to $268.46, down 4.9% from the previous close.
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Duolingo’s shares are extremely volatile and have experienced 36 moves greater than 5% over the last year. In this context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous significant move occurred 6 days ago when the stock dropped 7.3% following news of continued weakness as Google unveiled a suite of new AI-powered language learning tools, signaling a significant increase in competition. The tech giant's move introduces advanced, free offerings that could challenge Duolingo's market position and user engagement model. Google's entry into the language-learning space raises concerns among investors about Duolingo's future growth prospects and its ability to compete against a major corporation with vast resources.
Duolingo is down 17.6% since the beginning of the year, and at $268.46 per share, it is trading 50.3% below its 52-week high of $540.68 from May 2025. Investors who bought $1,000 worth of Duolingo’s shares at the IPO in July 2021 would now be looking at an investment worth $1,931.