Duolingo slips after Citi analysts trim price target and product announcements receive muted response

Duolingo dropped in early trading after Citi analysts snipped their price target to $375 from $400, citing, in part, some disappointment with announcements at Duolingo’s Duocon convention Tuesday, as well as deceleration in the growth of daily active users (DAUs) that continued into August.

Among other changes, the company announced improvements to its video call service — where language learners can practice their target language with an AI version of Duolingo characters — as well as enhanced offerings of its chess product, which it will expand to Android and offer in more languages, including Chinese.

“This year’s product announcements had a lower profile,” Citi analysts wrote, adding that they still “expect the video call improvements, better engagement drivers, and broader use case for chess to help drive better user growth trends.”

Still, Citi’s analysts pointed to decelerating year-on-year growth in key app metrics like downloads for their price target cut. Data from third-party groups that track app usage shows that the slowdown in the growth rate of daily active users, which seemed to stem from a social media backlash to an artless LinkedIn post from the company, continued through August.

“Duolingo DAU growth trajectory remains [the] key investor debate,” analysts at JPMorgan wrote in a note on Duolingo published Wednesday.

Through the end of August, DAU growth was 25% year on year, according to third-party data. That’s down from 31% in July, JPM said.