Is It Worth Investing in Duolingo (DUOL) Based on Wall Street's Bullish Views?

Core Viewpoint - Wall Street analysts' recommendations significantly influence investor decisions regarding Duolingo, Inc. (DUOL), but the reliability of these recommendations is questionable [1][3]. Brokerage Recommendations - Duolingo has an average brokerage recommendation (ABR) of 2.00, indicating a Buy, based on 15 brokerage firms' recommendations, with seven Strong Buy and one Buy, accounting for 46.7% and 6.7% respectively [2][12]. - Despite the positive ABR, relying solely on this information for investment decisions may not be advisable, as studies show brokerage recommendations often fail to guide investors effectively [3][8]. Analyst Bias - Brokerage analysts tend to exhibit a strong positive bias in their ratings due to vested interests, with five "Strong Buy" recommendations for every "Strong Sell" [4][8]. - This misalignment of interests can lead to misleading insights regarding a stock's future price movement [5][8]. Zacks Rank Comparison - Zacks Rank, a proprietary stock rating tool, categorizes stocks from 1 (Strong Buy) to 5 (Strong Sell) and is based on earnings estimate revisions, showing a strong correlation with near-term stock price movements [6][9]. - Unlike ABR, which is based solely on broker recommendations, Zacks Rank is a quantitative model that reflects timely earnings estimate revisions, making it a more effective predictor of future stock prices [7][10]. Earnings Estimates for Duolingo - The Zacks Consensus Estimate for Duolingo has increased by 7.2% over the past month to $2, indicating growing analyst optimism regarding the company's earnings prospects [11]. - This increase in consensus estimates, along with other factors, has resulted in a Zacks Rank 2 (Buy) for Duolingo, suggesting that the Buy-equivalent ABR may be a useful guide for investors [12].