Duolingo shares slide after KeyBanc downgrades due to valuation concerns

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Duolingo (NASDAQ:DUOL) shares fell sharply in premarket trading on Monday as KeyBanc analyst Justin Patterson advised clients that shares are fully valued.

Patterson advised that consumer spending trends are likely to moderate amid elevated macroeconomic pressures, with earnings revisions likely. Given the stock's 5% gain year to date has far outperformed a downtrend for the broader market, he assessed the stock as having risen to a fairly valued state.

“Given headwinds from inflation and signs of softness in other freemium apps, we believe multiple expansion and material revisions are less likely over the coming quarters,” he explained. “As such, we view risk/reward as balanced.

As a result, Patterson pulled his prior “Overweight” rating inward to a Neutral-equivalent rating. Shares of the Pittsburgh-based app education company fell 3.72% in early trading after the downgrade.

Read Needham Securities’ conversely bullish review of the stock offered late last week.

Comments

[WilliamFriday]

DUOL is a real head scratcher. In 2022 it is going to lose about $1.80. In 2023 it will lose about $1.20. Assuming it flips to a profit in 2024 of say, $1.20, it would be worth about 15 times earnings or about $18.00 a share. It looks like somebody is using a bot on the stock. It bumps up the bid penny by penny until it finds supply. The shares drop a little and the bot starts again. Always on the bid side, never on the offer.