Upward Analyst Revisions Before Earnings Might Change the Case for Investing in Duolingo (DUOL)

• Duolingo is set to report its Q2 earnings this Wednesday afternoon, with analysts forecasting 35% year-on-year revenue growth to US$240.8 million, reflecting a slower pace compared to last year's results.
• Growing analyst optimism is evident, as five upward revenue estimate revisions were made in the past month, signaling heightened expectations for Duolingo's near-term performance.
• With analysts revising revenue estimates upward ahead of earnings, we'll explore how this increased optimism could influence Duolingo's investment narrative.

These 15 companies survived and thrived after COVID and have the right ingredients to survive Trump's tariffs. Discover why before your portfolio feels the trade war pinch.

Duolingo Investment Narrative Recap

For investors to be interested in Duolingo, they need to believe in the company's ability to translate strong user engagement and global brand reach into consistent revenue growth and higher margin expansion. The recent wave of analyst revenue estimate upgrades ahead of Q2 earnings could influence short-term sentiment, but the key catalyst remains Duolingo’s ability to accelerate subscriber conversion and control costs, while the most pressing risk is the anticipated gross margin decline, which the latest news does not appear to materially affect.

Among recent announcements, the April launch of 148 new language courses, doubling total offerings, stands out as the most relevant. This push into expanded content has the potential to reach new users and deepen the global user base, tying closely to current optimism about revenue growth, but it could also introduce higher upfront costs, impacting near-term profitability and gross margins.

However, investors should also be mindful of the risk that even with rising user numbers, conversion to paid subscriptions could face headwinds if a large portion of growth continues to come from...

Read the full narrative on Duolingo (it's free!)

Duolingo's narrative projects $1.7 billion revenue and $343.7 million earnings by 2028. This requires 27.0% yearly revenue growth and a $246.9 million earnings increase from $96.8 million today.

Uncover how Duolingo's forecasts yield a $492.09 fair value, a 40% upside to its current price.

Exploring Other Perspectives

Fair value estimates from 14 members of the Simply Wall St Community range from US$250.52 to US$726.12. While optimism about new content offerings is high, ongoing margin pressures remain a point of caution among many participants.

Explore 14 other fair value estimates on Duolingo - why the stock might be worth 29% less than the current price!

Build Your Own Duolingo Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Duolingo research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.
• Our free Duolingo research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Duolingo's overall financial health at a glance.

Interested In Other Possibilities?

Markets shift fast. These stocks won't stay hidden for long. Get the list while it matters:

• AI is about to change healthcare. These 26 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10b in market cap - there's still time to get in early.
• Explore 26 top quantum computing companies leading the revolution in next-gen technology and shaping the future with breakthroughs in quantum algorithms, superconducting qubits, and cutting-edge research.
• The end of cancer? These 25 emerging AI stocks are developing tech that will allow early identification of life changing diseases like cancer and Alzheimer's.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com