Evercore advised buying Duolingo stock on the dip. Why is it his favorite?

Evercore ISI analysts named Duolingo language learning platform Duolingo as one of the best investments and expect it to grow by another 50%. They advised investors to take advantage of the recent drawdown of the securities and buy them on the fall. The analyst of JPMorgan investment bank also adheres to the similar opinion. On July 23, Duolingo shares jumped by 2.5%, but since the beginning of June they have gone down by almost a third.

An Evercore ISI analyst called Duolingo stock his top pick and advised investors to take advantage of the recent dip to buy. "We are capitalizing on the recent 33% correction [of Duolingo stock] and see significant upside potential of 50% to our $540 target price," the analysts said in a note quoted by CNBC.

Evercore raised its target price on Duolingo shares from $480 to $540 back in late June, reiterating an Outperform rating ("above market", equivalent to a "buy" recommendation). The decision was based on the results of fresh user surveys in the U.S. and Germany that revealed strong demand for online language learning. Evercore analysts noted at the time that Duolingo was consolidating its leadership in this segment and enjoying growing popularity in key markets. Among Duolingo's strengths, Evercore noted the variety of courses, high user loyalty and attractive paid features. All this, according to analysts, may become a driver of growth in average revenue per user (ARPU).

Duolingo shares jumped nearly 2.5% to $364.8 in trading on July 23. However, the company's market value has sagged by nearly a third since the beginning of June. Investorswere concerned about the language-learning app's future prospects after Apple announced the Live Translation feature at itsdeveloper conference. It will allow Apple users to automatically translate messages and calls in real time.

Additional pressure on Duolingo quotes came from data indicating a slowdown in the growth of the platform's user base, notes Investor's Business Daily. Analysts' consensus forecast called for daily user activity (DAU) to grow 44% year-over-year through the second quarter, the publication notes. However, actual data from the beginning of the quarter showed an increase of only 39%, according to Jefferies figures. Duolingowill release second-quarter 2025 results on Aug. 6.

JPMorgan analyst Brian Smilek on July 17 lowered his target price on Duolingo shares from $580 to $500, maintaining an Overweight recommendation. The analyst said the securities remain "questionable" amid cautious investor sentiment ahead of the report. He, too, pointed to third-party data suggesting a stronger slowdown in user base growth, lower subscription growth and increased churn from the paid Max plan. Nevertheless, JPMorgan maintains a positive view on Duolingo's leadership position and, like Evercore, recommended buying the stock on the drawdown.

Overall, 16 of the 26 analysts who rated Duolingo's stock advise investors to buy it (Buy and Overweight ratings). Another nine are neutral with a Hold rating and only one suggests selling (Underweight). Wall Street's consensus target price for the company's securities is $493 - 38% above the closing price on July 22.  

This article was AI-translated and verified by a human editor