On Thursday, Needham maintained a Buy rating on Duolingo Inc. (NASDAQ:DUOL) and increased its price target to $241 from the previous $210 on the shares. The revision follows Duolingo's robust fourth-quarter performance, which saw a significant beat in bookings, attributed to the widespread adoption of its Family Plan and a successful New Year's promotion.
The language-learning platform's daily active users (DAU) are showing signs of a slowdown, with growth decelerating into the mid-50s percentile in the first quarter of 2024. However, Duolingo's revenue and adjusted EBITDA guidance for the upcoming period have surpassed consensus expectations. This optimistic financial outlook suggests that Duolingo could continue to meet the Rule of 60+ company criteria in the fiscal year 2024.
Needham's analysts highlight Duolingo's consistent operational excellence and strong fundamental profile as justifications for the stock's premium valuation. The new price target of $241 is based on an enterprise value to sales (EV/sales) multiple of 15.3 times the firm's forecast for the fiscal year 2024. A discounted cash flow analysis also backs the target.
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