Duolingo stock hasn't had a good year but that could be changing soon, according to D.A. Davidson.

Analyst Wyatt Swanson on Tuesday upgraded the stock to Buy from Neutral with a price target of $160, up from $130. The fresh price target represents 23% upside from the stock's closing price on Monday.

Shares of the company, known primarily for its language-learning mobile application, advanced 3.8% to $135.16 on Tuesday. The S&P 500 and the tech-heavy Nasdaq Composite were down 0.6% and 1.3%, respectively.

It's been a tough run for the stock with investors fearing that artificial intelligence could make the company's offerings obsolete.

The stock has declined 23% this year and 60% over the past 12 months. Duolingo shares also are trading 75% below their record closing high of $540.68 from May 14, 2025.

D.A. Davidson, however, remains optimistic.

"Duolingo is nearing a turning point," Swanson wrote.

"We are upgrading shares of Duolingo from Neutral to Buy, with the assumption that underlying product work, marketing changes, and the continued efforts at refining the core monetization engine are underappreciated by investors and there is a long runway for growth in the coming years," the analyst added.

Swanson believes Duolingo's daily active user, or DAU, growth is accelerating and that June "marked an inflection point."

The firm forecasts strength in daily active users in July and August, and that Duolingo is retaining users that once would have moved away from the education platform.

"Our data through Aug. 15 implies third-quarter DAUs will increase 24% year-over-year," Swanson wrote.

The company's efforts to retain users seems to be paying off, with Duolingo narrowing its focus to improvements to its education courses and increasing daily users, according to Swanson.

The firm also sees positive momentum behind Duolingo's efforts to monetize its products through extended free-trials, new subscription plans, and a revamped advertising setup.

While D.A. Davidson might be getting out ahead of itself on Duolingo, the firm feels comfortable with its assessment of the company.

"If we are over-optimistic on the top line reacceleration, we view less downside risk given out-year consensus estimates aren't demanding and Duolingo isn't currently trading at an inflated multiple," Swanson wrote.