Freedom: Duolingo shares up 7.3% but risks from AI competition remain

Duolingo shares rose 7.3% on Tuesday after research firm DA Davidson raised its rating on Duolingo (DUOL) to “Buy” and increased its price target by 23% to $160. However, most Wall Street analysts maintain a more restrained view of the stock.

Duolingo is a U.S. technology company developing the eponymous platform for learning foreign languages. The service offers interactive lessons and uses gamification to encourage users to practice consistently.

Freedom analyst Natalya Milchakova believes that the stock’s further prospects will depend, among other things, on Duolingo’s ability to compete with neural networks, which can already perform many tasks related to learning foreign languages.

Why DA Davidson recommends buying Duolingo shares

DA Davidson raised Duolingo’s price target to $160 and upgraded its rating to “Buy.” The decision differs from the more cautious assessments of most Wall Street analysts, who assign the shares “Hold” or “Neutral” ratings.

In Duolingo’s favor, DA Davidson analysts highlight growth in daily active users, a shift in marketing strategy, and sustained high user loyalty. These factors could support the company’s further business development.

Following the recommendation, Duolingo shares rose 7.3%. However, the next day in premarket trading the stock was down nearly 1%.

In the view of Freedom analyst Natalya Milchakova, such dynamics may indicate that market participants are not yet confident about the company’s long-term prospects. It will be possible to assess how justified DA Davidson’s optimism is only over a longer time horizon.

Neural networks intensify competition with Duolingo

Natalya Milchakova considers the development of artificial intelligence to be one of the key risks for Duolingo. Modern neural networks are able to help users learn foreign languages and perform some of the functions of specialized educational apps.

Therefore, it is important for the company to prove that its product can remain attractive to its audience amid the emergence of alternative tools, the analyst believes. High user loyalty and growth in daily users support Duolingo’s position, but competition from neural networks may limit the business’s potential going forward.

Duolingo is expanding its use of artificial intelligence

Earlier Freedom reported on Duolingo’s large-scale expansion with the help of artificial intelligence. In May 2025, the company increased the number of language courses from 95 to 243, launching 148 new programs created using this technology. The expansion was intended to help the platform reach more than 1 billion potential users. 

Artificial intelligence is also used in the paid Duolingo Max subscription—specifically, for error explanations and personalized feedback. At that time, growth in paid Super and Max subscribers helped the company’s first-quarter results and its second-quarter outlook exceed Wall Street expectations. After the earnings release, Duolingo shares rose 13% in extended trading. 

Not an individual investment recommendation.