Evercore recommended buying Duolingo shares. The company could follow in Netflix's footsteps

Evercore ISI has upgraded its rating on shares of the online language-learning platform Duolingo and expects them to rise by more than 40%. This is the second analyst in a short period of time to go against the Wall Street consensus on the company. In premarket trading on September 1, Duolingo’s stock price jumped nearly 7%.

Evercore ISI analyst Mark Mahaney upgraded Duolingo’s rating from “neutral” to “outperform,” which is equivalent to a buy recommendation, and doubled the price target to $21, according to Barron’s. The new target implies growth potential of more than 40% from the August 31 closing price.

Mahanai suggested that Duolingo, whose market value has fallen significantly from its peak, could follow the same path as Netflix did in 2022. At that time—after a slowdown in growth sent the streaming giant’s stock price plummeting—the launch of new products helped revive the business. At the same time, the analyst acknowledges that the education platform’s shares are not as cheap now as Netflix’s were at that time, and the company itself is smaller in scale.

In early August, Duolingo’s stock price plummeted by more than 9% after its revenue forecast for the current quarter fell short of Wall Street’s expectations. Since then, the stock has rebounded by 21%, but it is still trading about 70% below its all-time high reached in May 2025, according to Yahoo Finance data.

The latest quarterly results show that users continue to actively engage with the app, according to Barron’s. Revenue in the second quarter grew 18% year-over-year, daily active users (DAU) increased by 23%, and the number of paying subscribers rose by 17%. Mahanani expects Duolingo’s daily active user base to surge by 70% by 2028, reaching 99 million, while Wall Street’s consensus forecast calls for only 85 million.

An Evercore analyst is betting that rapid audience growth will ultimately translate into higher revenue and profits than the market currently expects.

A recent Evercore survey of 1,300 Americans found that 53% of online respondents who are learning foreign languages use Duolingo, according to Barron’s. That’s roughly four times as many as its closest competitor, Babbel. At the same time, 66% of Duolingo users said they were “very” or “extremely” satisfied with the app.

However, there are also some warning signs: the same survey found that 33% of the platform’s users are highly likely to stop taking classes within the next three months—compared to 30% last year and 23% in 2024.

To retain its audience, Duolingo is actively rolling out new features. Conversation practice has become more accessible, and an AI-powered video call feature has been added to the basic Super paid subscription thanks to a significant reduction in the costs of maintaining it.

Although AI services may pose competition to companies, the Evercore survey found virtually no evidence that they are reducing engagement among existing users. For example, 36% of language learners use ChatGPT, but more than half of them also use Duolingo. Furthermore, 63% of this overlapping audience logs into the app daily, which is generally in line with the average activity rates of all the service’s users.

“AI doesn’t disrupt established habits,” Mahanai emphasized. In his view, the main risk posed by neural networks lies not in the loss of the existing audience, but in potential difficulties in attracting new casual users.

Evercore's decision was not an isolated one on Wall Street, notes Investing.com. A series of positive re-ratings were seen throughout August: DA Davidson also recommended buying the company's stock, while JPMorgan and Wedbush raised their price targets.

Meanwhile, the consensus rating for Duolingo shares remains at "Hold." Of the 27 analysts covering these stocks, only six recommend buying them, while one advises selling.

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