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Shares of Duolingo Inc (NASDAQ:DUOL) are trading lower Monday afternoon, extending a sharp decline that began after its third-quarter earnings report last Wednesday. Despite the company beating analyst estimates, Wall Street has soured on the stock amid a shift in company strategy.
What To Know: Last week, Duolingo reported third-quarter revenue of $271.7 million, beating estimates of $260.33 million. Daily Active Users (DAUs) also grew 36% year-over-year to 50.2 million.
However, the stock “nosedived” as analysts focused on guidance suggesting “monetization [was] moved to the backburner.” Analysts noted the company plans to increase spending on long-term investments and marketing, such as its “unhinged” social media content, rather than near-term profitability. DA Davidson also highlighted that DAU growth decelerated from the previous quarter.
The strategic shift triggered a wave of downgrades and price target cuts. KeyBanc downgraded the stock to Sector Weight, while firms like Goldman Sachs, JP Morgan, Scotiabank and Wells Fargo all slashed their 12-month price targets, signaling concerns over the new spending focus.
Benzinga Edge Rankings: Underscoring the stock’s recent weakness, Benzinga Edge rankings show a very low Momentum score of 5.33, even as its Growth score remains high at 94.55.
DUOL Price Action: Duolingo shares were down 3.91% at $193.35 at the time of publication on Monday. The stock is trading near its 52-week low of $182.00, according to Benzinga Pro data.
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Besides going to a brokerage platform to purchase a share – or fractional share – of stock, you can also gain access to shares either by buying an exchange traded fund (ETF) that holds the stock itself, or by allocating yourself to a strategy in your 401(k) that would seek to acquire shares in a mutual fund or other instrument.
For example, in Duolingo’s case, it is in the Consumer Discretionary sector. An ETF will likely hold shares in many liquid and large companies that help track that sector, allowing an investor to gain exposure to the trends within that segment.
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