Learning a new language isn’t easy; high school kids, for example, toil for years to master even a smattering of French, Spanish, or something else. For Duolingo (NASDAQ:DUOL), it’s proving a challenge to just provide the services, and analysts are taking notice. That’s left a hole in Duolingo’s stock price, down nearly 9% in Wednesday’s trading.
The bad news hit as a team at JMP Securities dropped Duolingo from “Outperform” to “Market Perform.” While Duolingo has had quite a successful year—the JMP Securities report notes it’s up nearly 100% as of the report’s writing—that’s well past JMP’s previous price target. That means that rapid growth is now expected as opposed to surprising and is, therefore, less likely to drive further gains. That’s part of why JMP recommended a shift away from buying in and more toward hanging on.
Though it may be a bad idea to count Duolingo out yet for further growth. Earlier today, Duolingo announced a team-up with anime streaming service Crunchyroll. Not only will the new deal allow for a free month of Super Duolingo, but it will also help users learn to speak Japanese. Since Japanese is the prime language of anime, the association is about as natural as it gets. It should also go a long way toward pulling in more users and keeping that rapid growth engine moving.
Analysts, however, are split on Duolingo’s future. With five Buy ratings and three Holds, Duolingo stock is just barely a Moderate Buy. Plus, with an average price target of $152.29, it also comes with some downside risk.
