Duolingo Stock Plummets After Slowing User Growth, Possibly Caused By 'AI-First' Backlash

'Duolingo stock fell for the fourth straight trading day on Wednesday,' reported Investor's Business Daily, 'as data shows user growth slowing for the language-learning software provider.'
Jefferies analyst John Colantuoni said he was 'concerned' by this drop — saying it 'may be the result of Duolingo's poorly received AI-driven hiring announcement in late April (later clarified in late May).'

Also Wednesday, DA Davidson analyst Wyatt Swanson slashed his price target on Duolingo stock to 500 from 600, but kept his buy rating. He noted that the ''AI-first' backlash' on social media is hurting Duolingo's brand sentiment. However, he expects the impact to be temporary.

Colantuoni also maintained a 'hold' rating on Duolingo stock — though by Monday Duolingo fell below its 50-day moving average line (which Investor's Business Daily calls 'a key sell signal.')

And Thursday afternoon (2:30 p.m. EST) Duolingo's stock had dropped 14% for the week, notes The Motley Fool:

While 30 days' worth of disappointing daily active user (DAU) data isn't bad in and of itself, it extends a worrying trend. Over the last five months, the company's DAU growth declined from 56% in February to 53% in March, 41% in April, 40% in May [the month after the 'AI-first' announcement], and finally 37% in June.

This deceleration is far from a death knell for Duolingo's stock. But the market may be justified in lowering the company's valuation until it sees improving data. Even after this drop, the company trades at 106 times free cash flow, including stock-based compensation.

Maybe everyone's just practicing their language skills with ChatGPT?

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