Morgan Stanley acknowledged that it misjudged Duolingo’s ability to expand revenue per user alongside audience growth, adding that management now plans to ramp up spending while easing its focus on revenue growth.
Shares of Duolingo Inc. (DUOL) came under pressure on Friday after two Wall Street firms sharply cut their ratings and price targets, citing doubts about the language-learning platform’s growth trajectory and monetization strategy.
Though Duolingo’s fourth-quarter (Q4) revenue of $282.9 million beat the analysts’ consensus estimate of $276 million, according to Fiscal AI data, the company issued a weak booking outlook of 10% to 12% growth in 2026.
Shifting Priorities
Morgan Stanley analyst Nathan Feather downgraded the stock to ‘Equal Weight’ from ‘Overweight’ and slashed his price target to $100 from $245, according to TheFly.
The firm acknowledged it misjudged Duolingo’s ability to expand revenue per user alongside audience growth, adding that management now plans to ramp up spending while easing its focus on gaining revenue from users.
Feather said Duolingo is boosting investment to revive slowing daily active user trends. That strategy includes dialing back monetization efforts to strengthen the platform’s appeal, particularly for free users. Morgan Stanley cautioned that it is uncertain if the recalibration can aid in user expansion.
Duolingo stock traded over 24% lower in Friday’s premarket. However, on Stocktwits, retail sentiment around the stock jumped to ‘extremely bullish’ from ‘bearish’ territory the previous day. Message volume shifted to ‘extremely high’ from ‘low’ levels in 24 hours.
Evercore Downgrades Stock
Separately, Evercore ISI analyst Mark Mahaney also downgraded the stock, moving it to ‘In Line’ from ‘Outperform.’ He cut his price target to $114 from $330 after trimming forecasts following the company’s Q4 results.
Mahaney said the company is “aggressively pivoting” away from near-term revenue optimization toward initiatives designed to broaden its user base. By prioritizing improvements to the free offering, Evercore believes Duolingo may limit its immediate revenue upside.
The firm warned that this approach “significantly reduces” the chances of a substantial near-term re-rating in the stock.
DUOL stock has declined by more than 68% over the last 12 months.
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