Shares of Duolingo, Inc. (DUOL) plunged 5.06% in Tuesday's trading session following a price target cut by Morgan Stanley. The investment bank lowered its target for the language learning platform from $515 to $480, while maintaining an overweight rating on the stock.

The downward revision in price target comes despite Duolingo's strong financial performance in recent quarters. The company has been experiencing rapid growth, with its first-quarter results for 2025 showing a 38% year-over-year increase in revenue to $230.7 million. Duolingo has also been successfully monetizing its user base, with paying subscribers growing by 40% to 10.3 million.

However, the stock's valuation remains a concern for some investors. Trading at a price-to-earnings ratio of 193.1, significantly higher than the S&P 500's 24.1, Duolingo's shares are considered expensive by traditional metrics. This premium valuation, coupled with the recent price target cut, may have prompted some investors to reassess their positions, leading to Tuesday's sell-off. Despite the dip, analysts maintain an overall positive outlook on Duolingo, with an average rating of overweight and a mean price target of $493.44, according to FactSet data.