Duolingo: This Beaten-Down Stock Is About to Rally 38%
Just a few weeks ago, Duolingo Inc (NASDAQ: DUOL) was flying high, up 200% since August and setting fresh all-time highs in February. Now, the tech company is down more than 30% in barely two weeks, and it’s approaching key support levels that could make this a turning point.
The bulk of the damage came in the past two trading sessions following last Thursday’s earnings report. Investors reacted sharply to a disastrous 40% EPS miss, which overshadowed an otherwise strong revenue beat.
The stock has now given back all its gains since October, and the market’s reaction suggests that expectations had gotten too high.
But with analysts doubling down on their bullish outlook, the question is: Has the sell-off gone too far?
Wall Street Is Focused on the Wrong Number
Duolingo’s earnings report wasn’t all bad. In fact, revenue growth was exceptional. The company posted a 38% year-over-year increase in revenue, driven by robust user growth as more people engage with Duolingo’s platform and higher conversion rates to paid subscriptions, a key metric for long-term sustainability.
Those are strong numbers by any standard, and they reinforce the idea that Duolingo’s business is still growing rapidly. However, Wall Street was fixated on one number - earnings per share (EPS).
Analysts had expected EPS to come in at $0.48, but instead, Duolingo delivered just $0.28—a 40% miss, primarily due to higher-than-expected operating expenses. The sharp market reaction suggests that investors weren’t prepared for such a big earnings miss after the stock’s massive rally.
But the real question is whether this was a one-time stumble or a sign of deeper issues. If the company can tighten expenses in the next quarter, sentiment could shift quickly, particularly given the company’s underlying growth story remains strong.
Analysts Still See Big Upside
Despite the post-earnings sell-off, Wall Street analysts aren’t backing down.
Since last week’s earnings, Barclays, JPMorgan Chase, and Piper Sandler have all reiterated Buy ratings, with price targets reaching as high as $410.
That represents a 38% upside from Monday’s closing price of $295, which would put Duolingo back near its all-time highs.
When multiple top analysts reaffirm their bullish outlook after a major sell-off, it’s often a sign that fundamentals remain intact and that the market may have overreacted.
Analysts are clearly looking past the earnings miss and focusing on the company’s long-term revenue growth and subscriber expansion.
Why Technicals Suggest a Bounce Could Be Imminent
From a technical perspective, Duolingo looks extremely oversold. The RSI sits at just 28, a level that historically signals the potential for a sharp rebound.
The stock has now retraced all the way back to October levels, a price range that previously acted as support before the big rally began. If buyers step in around this area, the next move could be a fast recovery rally driven by traders looking for an oversold bounce, short sellers taking profits after the recent collapse, or institutions continuing to accumulate at a discount.
If the stock finds support and stabilizes, the next move could be a fast rebound toward the $330–$350 range before the market reassesses Duolingo’s growth potential in the next earnings cycle.
What Needs to Happen Next
For Duolingo to sustain a recovery, it will need to prove to investors that last quarter’s earnings miss was an outlier. That means showing improved cost control in the next earnings report, continuing to grow revenue at a strong pace, and avoiding any further margin compression that could raise concerns about profitability.
If Duolingo can deliver a cleaner earnings print next quarter, there’s every reason to believe this sell-off was just a bump in the road rather than a sign of deeper trouble.
The market has punished Duolingo harshly for its earnings miss, but analysts and technicals suggest this sell-off may have gone too far. With revenue growth still booming, analysts holding firm on bullish ratings, and the stock now deeply oversold, there’s a strong case for a sharp recovery.
For those looking to catch a high-growth stock at a discount, this may be one of the best entry points in months.
Learn more about DUOL
