What happened
Shares of Duolingo (DUOL 4.25%) just can't be stopped, it seems. Since tech stocks began their turnaround earlier this week, shares of the language-learning app maker have delivered an astounding 34% return, including today's 10.6% rise through 1:30 p.m. EDT.
A move by Evercore ISI analysts on Tuesday morning started the rise.
Image source: Getty Images.
So what
Tuesday morning, just before the stock started rising, Evercore ISI analysts announced they had added Duolingo to their list of Best SMID 'Core' Ideas. (SMID means small-cap and mid-cap stocks -- those with market capitalizations of less than $10 billion, the point at which mid caps start turning into large caps).
TheFly.com, which reported Evercore's move on Tuesday, didn't give any details on Evercore's reasons for adding Duolingo to the list. Regardless, that appears to have been catalyst enough for investors to resume buying the stock.
Now what
Investors jumped at the excuse to get back to buying Duolingo. The stock is down 40% over the past year, and was starting to trade at a significant discount to other high-growth tech names, with a price-to-sales ratio now finally in the single digits at 7.2.
That being said, with Duolingo stock now up more than 30% in just four days, I'm not at all certain there are much more gains to be had from it. Although its P/S ratio no longer looks especially scary, the company remains deeply unprofitable with $60 million in losses last year. That's four times what it lost in 2020. Furthermore, analysts who follow the stock predict continued losses at least through 2024, and probably longer.
Just because Duolingo stock has momentum this week doesn't mean you should buy it.
