Jon Quast, The Motley Fool
5 min read
In This Article:
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Duolingo stock has surged to levels that do not make sense for some investors.
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The underlying business is performing extraordinarily well, and management isn't resting on its laurels.
After jumping a hefty 43% in 2024, shares of language-learning app Duolingo (NASDAQ: DUOL) are up another 47% so far in 2025. And according to select Wall Street analysts, the stock has simply climbed too far, too quickly.
Stock research platform TipRanks is currently tracking 15 analysts who cover Duolingo stock. Of these analysts, none recommend selling the stock, but their average price target is $476 per share, slightly below where Duolingo is trading as of this writing.
In other words, Duolingo stock trades above what these professionals believe it's worth. It's obviously time to sell, right? Well, it's more complicated than that.
Most Wall Street price targets only take into account the next 12 to 18 months. But for those who want to consistently do well investing in stocks, a long-term view is beneficial.
Investors who hold stocks for five years or more tend to outperform their less patient counterparts. But the buy-and-hold philosophy can't be used indiscriminately. To the contrary, the underlying business still needs to do well during the holding period -- buying and holding businesses with declining fundamentals is still a losing proposition.
Therefore, that's the first thing to consider with Duolingo: Is this business poised to do well over the next five years?
Duolingo is known for its language-learning courses, and that business is absolutely booming. Nearly 47 million people used the platform every single day during the first quarter of 2025, and 10 million people pay for a subscription that offers extra perks, a whopping 40% increase from the prior-year period.
Duolingo's management attributes its success to a variety of factors, but here are two big ones. First, the company does a lot of A/B testing, constantly making changes based on what's working with its users. Second, it also incorporates a lot of game-like elements into the learning process, keeping users motivated and engaged.
Now, Duolingo is taking its language expertise and broadening its focus to other verticals, such as math, music, chess, and more. There's no limit to what the company can do when it comes to launching courses and programs, which greatly increase its market opportunity.
For what it's worth, companies that can easily expand their market opportunity with related products and services often do well over the long term. Revenue growth is important for creating shareholder value, and it's easier to grow the top line when the opportunity is getting bigger.
