Duolingo Stock Surges After Evercore ISI Upgrades to 'Outperform'

Shares of Duolingo Inc. (NASDAQ: DUOL) surged 6.5% in premarket trading on Tuesday following a significant ratings upgrade from Evercore ISI. The firm raised its stance on the language-learning platform to 'Outperform' from 'In Line,' citing positive data trends and potential for significant earnings growth.

Evercore Sees 40% Upside

Evercore ISI analyst Mark Mahaney set a new price target of $210 per share, implying more than 40% upside from previous levels. The upgrade was based on a proprietary survey, analysis of product improvements, and third-party tracking of daily active user (DAU) trends.

In a note to clients, Mahaney stated that the firm is "materially increasing our estimates," with its 2027 and 2028 earnings per share (EPS) forecasts now sitting 10% and 25% above Street consensus, respectively. The analyst drew a parallel to Netflix's 2022 recovery, where product changes drove a rebound, while acknowledging that Duolingo's valuation is less attractive and it lacks the same scale.

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DA Davidson Boosts Target on Strong User Metrics

Reinforcing the bullish sentiment, DA Davidson analyst Wyatt Swanson raised his price target on Duolingo to $175 from $160, while maintaining a 'Buy' rating. Swanson's decision was supported by in-house data tracking over 170,000 existing users, which showed continued strength in user engagement.

According to Swanson's analysis, week-over-week DAU growth has been accelerating. The data indicates that third-quarter DAU growth could land between 25.6% and 27.6% year-over-year. The analyst also noted that August DAUs increased 1.3% month-over-month, with the final week of the month showing the strongest growth since a company event in early June.