Will A TikTok Ban Impact Duolingo's 240M-Plus Likes? Analyst Says 'No,' Sees 25% Upside

In a market filled with uncertainties, Duolingo Inc DUOL stands out as the most discussed name in the ed-tech space.

After drawing positive sentiment and investor confidence in meeting management’s 2024 goals, the stock is up 67% over the past year.

Duolingo Analyst: JPMorgan analyst Bryan M. Smilek provided some key insights from the first-quarter 2024 report.

With an Overweight rating on the stock with a price target of $270 a share, Smilek sees an upside of 25% from current price levels.

Also Read: Language Lesson App Duolingo ‘Poised For Strong User Growth,’ Bullish Analyst Says

Duolingo Thesis: Smilek maintains an optimistic outlook on Duolingo, projecting strong user and paid subscription growth, revenue expansion, and margin improvement for the foreseeable future.

Key points according to Smilek include:

• Resilience Amidst Uncertainty: Despite sector underperformance concerns, Duolingo maintains its position as a favored investment. Conversations indicate a strong belief in achieving management’s targets for 2024.

• TikTok Ban Unlikely to Disrupt: Discussions surrounding a potential U.S. TikTok ban persist, Smilek reassured investors that Duolingo’s acquisition strategies are primarily driven by product innovation and word of mouth, minimizing the impact of such regulatory changes. “DUOL's TikTok strategy has resonated well with consumers & helped increase brand awareness,” he said.

• Focus on Growth Drivers: Smilek sheds light on Duolingo’s growth catalysts, emphasizing the freemium model, product enhancements, and marketing strategies as key drivers for deeper monetization and expansion in the English learning market. “Product innovation & word of mouth are DUOL's primary drivers of acquisition,” said Smilek.

• Leveraging Efficiently for Margin Expansion: With a strategic focus on operating expenses and investments in core business areas, Duolingo anticipates significant margin expansion in 2024. This would also underline its commitment to long-term growth and scalability. According to Smilek, “tiered pricing should drive deeper conversions, retention, & pricing power as DUOL tests relative pricing & features.”

“Duolingo is the most discussed name & sentiment skews positive, with our conversations suggesting investor confidence in achieving mgmt's 2024 guidance,” said Smilek.

DUOL Price Action: Duolingo stock closed the trading day of March 18 at $216.53 a share.

Read Next: Duolingo Q4 Earnings: Revenue Beat, EPS Beat, Engagement Growth, Strong Guidance

Image: Shutterstock