Duolingo Stock Jumps After Bank of America Says It's More Than A Language App

Duolingo, Inc. (NASDAQ:DUOL) shares are trading after B of A Securities upgraded the stock from a Neutral rating to a Buy rating.

What To Know: According to Investing.com, Bank of America said the market is underestimating Duolingo's appeal as an entertainment product and its potential to grow beyond traditional language learning.

The firm said Duolingo operates across two large markets: education, where users pay to learn languages and other skills, and entertainment, where users spend time on casual mobile games during short breaks throughout the day.

Bank of America said this entertainment angle is not fully reflected in current growth forecasts. The firm highlighted Duolingo's high retention and monetization metrics, noting roughly 95% annual subscriber retention and a payer-to-daily-user ratio of about 23%, which it said compares favorably with mobile gaming apps.

The firm estimates Duolingo can address a much broader audience by appealing to approximately 3 billion people worldwide who play casual mobile games. Analysts also pointed to a large group of users seeking apps to fill short gaps in their day, a need Duolingo meets by combining gaming-style mechanics with learning.

The brokerage trimmed its price target to $250 from $301 but said the stock still appears inexpensive relative to its long-term growth outlook. Bank of America said it values Duolingo based on earnings rather than sales, citing the company's profitability and its discount compared with other fast-growing subscription and consumer entertainment apps.

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DUOL Price Action: At the time of writing, Duolingo stock closed 4.91% higher at $185.15, according to data from Benzinga Pro.

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