Duolingo Upgraded: Analyst Sees AI As Ally, Not Threat

Duolingo Inc DUOL is poised to outperform estimates over the next 12 months, given "a combination of product and viral marketing efforts, according to KeyBanc Capital Markets.

The Duolingo Analyst: Analyst Justin Patterson upgraded the rating from Sector Weight to Overweight, while keeping the price target at $460.

The Duolingo Thesis: The company's stock has been under pressure, shedding 11% year to date, on concerns that AI will contract its total addressable market (TAM) both in the US and internationally,Patterson said in the note.

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While Duolingo has several drivers ahead, AI innovations "are more likely to help, than hurt, monetization," he added.

The company is replacing Hearts with Energy, which rewards users for correct answers, the analyst stated. "The initial iOS rollout has shown improvements to DAUs, median time spent learning well, and subscriber conversion, and management noted it is rare for a feature to move one of these metrics, let alone all three," he further wrote.

DUOL Price Action: Shares of Duolingo had risen by 9.13% to $356.80 at the time of publication on Monday.

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