What happened
Although it ended up being a bit of an up-and-down stock this week, Duolingo (DUOL 5.34%) ultimately saw its share price rise by nearly 5% in the Monday to Friday period, data provided by S&P Global Market Intelligence reveal. The main factors in the stock's recent lift are a general investor return to tech stocks, even the more speculative ones, and an analyst recommendation upgrade.
So what
Earlier this month, tech companies had fallen from investor grace as they are typically considered to be relatively speculative plays. With a world convulsed by the war in Ukraine and spooked about its looming economic aftershocks, many adjusted their portfolios in favor of investments seen to be safer. This pushed numerous tech titles down, to the point where their prices have become attractive again.
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Compounding this trend for Duolingo, on Monday KeyBanc analyst Justin Patterson upgraded his recommendation on its stock. Patterson tagged it with an overweight (i.e., buy), up from the previous sector weight (neutral).
Duolingo offers language lessons through its popular app, which utilizes the freemium model. The product's appealing presentation, plus the gaming element it utilizes to keep customers plowing through the lessons, have helped power the company's growth. Patterson believes this growth can be meaningful and sustainable.
"We believe product and monetization initiatives [that] reinforce Duolingo can be a sustainable [approximately] 30% grower as it transforms into a multi-app product family," he wrote in a new research note.
Now what
This sustained fundamental growth will power Duolingo stock's continued rise, Patterson feels. He's got a $112 per-share price target on the shares. If realized, this would mean upside of more than 20% over their current level.
