Duolingo Should Drive User Growth Without Reducing Monetization, Morgan Stanley Says

MT Newswires Live02-28

Duolingo (DUOL) needs to show that it can stabilize medium-term user growth without having to keep cutting back on monetization, Morgan Stanley said in a note Friday.

As the company increased monetization in 2025, user growth fell likely due to less word-of-mouth marketing and weakened brand sentiment, the investment firm said. To stabilize daily active user growth, the company is investing in free user experience, increasing spend and making "far deeper and more durable cuts" to monetization than expected, according to the note.

Morgan Stanley said the changes may be the correct move for the long term, with a reasonable chance of success, but there is limited visibility on when user growth will stabilize and the company is not likely to show a sustainable growth trajectory over the next few quarters.

The investment firm reduced its bookings estimates by 4% and 10% for 2026 and 2027, respectively, while revenue estimate is unchanged for 2026 and down 5% for 2027.

Morgan Stanley downgraded its rating to equal-weight from overweight, and cut the price target to $100 from $245.

Shares of Duolingo were down more than 14% in recent trading Friday.

Price: 100.71, Change: -16.74, Percent Change: -14.25

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap
Leave a comment