Duolingo: This Beaten-Down Stock Is About to Rally 38%

Core Viewpoint - Duolingo's stock has experienced a significant decline of over 30% in two weeks following a disappointing earnings report, despite strong revenue growth and bullish analyst outlooks [1][2][4]. Financial Performance - Duolingo reported a 38% year-over-year increase in revenue, driven by robust user growth and higher conversion rates to paid subscriptions [3][4]. - The company missed earnings per share (EPS) expectations by 40%, reporting $0.28 instead of the anticipated$0.48, primarily due to higher operating expenses [2][4]. Analyst Sentiment - Despite the earnings miss, analysts maintain a positive outlook, with a 12-month price target averaging $375, indicating a potential upside of 32.77$410 [7][8]. Technical Analysis - The stock is considered extremely oversold, with a Relative Strength Index (RSI) of 28, historically signaling a potential for a sharp rebound [9]. - The stock has retraced to October levels, which previously acted as support, suggesting a possible recovery if buyers step in [10][11]. Future Outlook - For Duolingo to sustain a recovery, it must demonstrate improved cost control and continued strong revenue growth in the next earnings report [12][13]. - Analysts believe that if the company can deliver a cleaner earnings report next quarter, the recent sell-off may be viewed as a temporary setback rather than a sign of deeper issues [13].