Brokers Suggest Investing in Duolingo (DUOL): Read This Before Placing a Bet

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on Duolingo, Inc. (DUOL), and emphasizes the importance of using these recommendations in conjunction with other analytical tools like the Zacks Rank for making informed investment decisions [1][3]. Brokerage Recommendations - Duolingo has an average brokerage recommendation (ABR) of 1.87, indicating a consensus between Strong Buy and Buy, with 60% of recommendations being Strong Buy and 6.7% being Buy [2]. - Despite the positive ABR, the article cautions against making investment decisions solely based on this metric, as studies show limited success of brokerage recommendations in predicting stock price increases [3][4]. Analyst Bias - Analysts from brokerage firms tend to exhibit a strong positive bias in their ratings, often issuing five "Strong Buy" recommendations for every "Strong Sell" [4][8]. - This bias can mislead investors, as the interests of brokerage firms may not align with those of retail investors [5][8]. Zacks Rank vs. ABR - The Zacks Rank is presented as a more reliable indicator of a stock's near-term price performance, based on earnings estimate revisions, and is classified into five groups from Strong Buy to Strong Sell [6][9]. - Unlike the ABR, which is based solely on brokerage recommendations, the Zacks Rank incorporates quantitative models and is updated more frequently to reflect current business trends [7][10]. Earnings Estimates for Duolingo - The Zacks Consensus Estimate for Duolingo has increased by 7.6% over the past month to $1.87, indicating growing analyst optimism regarding the company's earnings prospects [11]. - This increase in consensus estimates, along with other factors, has led to a Zacks Rank of 1 (Strong Buy) for Duolingo, suggesting a favorable outlook for the stock [12].