Shares of Duolingo Inc. (NASDAQ: DUOL) surged 3.9% in premarket trading on Tuesday after Evercore ISI analysts delivered a major vote of confidence, doubling their price target on the language-learning platform to $210. The stock was trading at $154.09 at 05:28:49 EDT, up from Monday's close of $148.36.
Evercore ISI analyst Mark Mahaney upgraded Duolingo from In Line to Outperform and raised his price target to $210, a significant increase from the previous $105 target. This new target implies a 36.3% upside from the premarket price and a 41.5% gain from Monday's closing price.
Mahaney's bullish stance is rooted in the company's accelerating engagement metrics, which he believes will eventually translate into stronger bookings. He drew a parallel to Netflix Inc. (NASDAQ: NFLX), stating that Duolingo's current situation "reminds us of the '22 NFLX stock scenario," referencing Netflix's recovery after it revamped its service offerings.
The core of Mahaney's thesis lies in the divergence between user growth and monetization. In the second quarter, Duolingo reported a 23% year-over-year increase in daily active users (DAUs), while total bookings grew only 8%. The adjusted EBITDA margin also contracted by 5.3 percentage points to 25.9% from 31.2% in the prior-year period.
Despite this profitability trade-off, Mahaney is betting that Duolingo's engagement gains will eventually drive bookings back to prior highs. He forecasts the daily active user base will climb to approximately 99 million by 2028, up from 58.7 million in the most recent quarter. His 2027 and 2028 earnings estimates are 10% and 25% above consensus, respectively.
Duolingo's second-quarter results showed robust growth across key metrics: revenue rose 18% to $298.5 million, paid subscribers increased 17% to 12.7 million, and total bookings grew 8%. The company maintained its full-year revenue guidance of $1.207 billion, representing a 16.3% increase, and raised its adjusted EBITDA margin forecast to approximately 26.5%.
For the third quarter, Duolingo expects a slower revenue growth rate of 11.1%, while bookings are projected at $1.285 billion for the full year, up 10.9%. The company also highlighted its AI-powered Video Call feature, which is being rolled out more broadly, with management expecting related costs to remain manageable.
At the current price of $154.09, Duolingo's equity value is approximately $7.81 billion, based on roughly 50.7 million diluted shares. This equates to about 6.5 times the company's anticipated 2026 revenue. If the stock reaches Evercore's $210 target, the multiple would expand to approximately 8.8 times.
The company also reported having about $1.3 billion in cash and short-term investments as of the end of June, and it repurchased roughly 708,000 shares for $71.9 million by August 1, helping to offset equity dilution.
However, risks remain. The increased use of AI tools may add pressure to attract more casual users, and bookings growth continues to lag usage gains. Additionally, Duolingo estimates that a 1% change in the U.S. dollar against its basket of currencies would impact bookings for the second half by $4 million.
As regular trading begins at 09:30 EDT, the key focus will be whether the stock can sustain support near $154. Holding above this level would still leave the shares trading well below Evercore's new target, leaving room for further upside if the engagement story plays out as Mahaney predicts.
