Duolingo, Inc. (DUOL) shares plummeted 5.06% in Tuesday's trading session, following a downward revision of its price target by Morgan Stanley. The investment bank cut its target price for the language-learning platform from $515 to $480, while maintaining an overweight rating on the stock.
The stock's sharp decline comes amid a broader reassessment of Duolingo's valuation in the market. Despite the company's strong financial performance, with rapid growth in both revenue and earnings, investors appear to be growing cautious about the stock's high valuation metrics. Duolingo's price-to-earnings (P/E) ratio stands at a lofty 193.1, significantly higher than the S&P 500's average of 24.1.
While Duolingo continues to show impressive user growth and innovative AI-driven features, the market seems to be grappling with the stock's premium valuation. The company's recent 26% decline from its May highs, coupled with Morgan Stanley's price target cut, suggests that investors are recalibrating their expectations for the stock. As Duolingo navigates this valuation scrutiny, long-term investors may view this dip as an opportunity, while short-term traders remain cautious.
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