Duolingo Stock Plummets Amid Market Rise: Key Insights

Market Performance and Stock Movement

In the latest trading session, Duolingo, Inc. (DUOL) closed at $355.86, reflecting a -3.95% decline from the previous day's closing price. This movement was notably worse than the S&P 500, which saw a modest gain of 0.14%. The Dow Jones Industrial Average also experienced a slight loss of 0.04%, while the Nasdaq Composite, known for its technology-heavy composition, rose by 0.38%.

Before today’s trading, shares of Duolingo had already declined by 21.44%, underperforming both the Business Services sector, which gained 2.04%, and the broader S&P 500, which climbed 5.35%. This performance highlights the challenges that the company has faced in recent weeks.

Upcoming Earnings Report

Investors are closely watching Duolingo as it prepares to release its earnings report on August 6, 2025. Analysts anticipate that the company will report an EPS of $0.55, representing a 7.84% increase compared to the same quarter last year. Additionally, the consensus estimate for revenue stands at $240.53 million, which would mark a significant 34.88% growth over the previous year’s figures.

Looking ahead for the full fiscal year, the Zacks Consensus Estimates predict earnings of $2.9 per share and total revenue of $995.83 million. These projections indicate a 54.26% increase in earnings and a 33.13% rise in revenue compared to the prior year. Such growth expectations suggest that the company is positioned for continued expansion in the coming months.

Analyst Estimates and Zacks Rank

Recent changes in analyst estimates for Duolingo are being closely monitored by investors. These revisions often reflect shifting short-term business trends and can signal analysts' confidence in the company's future performance. Positive adjustments in estimates typically indicate a favorable outlook on the company's financial health and profitability.

Research has shown that these estimate revisions are strongly linked to near-term stock price movements. To help investors make informed decisions, a proprietary model known as the Zacks Rank has been developed. This system incorporates estimate changes and provides a rating that ranges from #1 (Strong Buy) to #5 (Strong Sell).

Historically, the Zacks Rank has demonstrated strong performance, with #1 stocks delivering an average annual return of +25% since 1988. Over the past 30 days, the Zacks Consensus EPS estimate for Duolingo has slightly decreased by 0.25%. As of now, the company holds a Zacks Rank of #4, indicating a "Sell" recommendation.

Valuation Metrics

From a valuation perspective, Duolingo is currently trading with a Forward P/E ratio of 127.88, significantly higher than the industry average of 20.48. This suggests that the stock is trading at a premium relative to its peers.

Another key metric, the PEG ratio, stands at 2.85 for Duolingo. This ratio adjusts the traditional P/E ratio by factoring in the company's expected earnings growth rate. In comparison, the average PEG ratio for the Technology Services industry is 1.56. This indicates that Duolingo's valuation is relatively high when considering its projected growth.

Industry Position and Performance

The Technology Services industry, which includes Duolingo, is part of the broader Business Services sector. Currently, this industry holds a Zacks Industry Rank of 71, placing it within the top 29% of over 250 industries. This ranking reflects the overall strength of the sector and its potential for outperformance.

According to research, the top 50% of rated industries tend to outperform the bottom half by a factor of 2 to 1. This underscores the importance of industry positioning when evaluating investment opportunities.

Conclusion

As investors continue to monitor Duolingo's performance, the upcoming earnings report and analyst estimates will be critical factors to watch. With a high valuation and a Zacks Rank of #4, the stock may present risks for some investors. However, the company's projected growth and strong industry position could offer long-term value for those willing to take a more strategic approach.