Duolingo stock soars as online learning surge and AI boost forecast

(Reuters) - Language learning platform Duolingo's shares surged more than 20% in premarket trading on Thursday as the company forecast better-than-expected 2024 revenue on the back of a shift to online learning and AI integration on the platform.

The company is set to add $1.68 billion to its market value if gains hold.

Duolingo forecast 2024 revenue in a range of $717.5 million to $729.5 million, blowing past analysts' average estimate of $699.3 million, according to LSEG data.

The language learning market is increasingly shifting to online modes with Duolingo having emerged as a clear leader with its "freemium" model, according to a note from Seaport Global.

It has also successfully leveraged generative artificial intelligence (GenAI) in its offerings, analysts said.

A new subscription tier, Duolingo Max, which includes GenAI features, was introduced in March last year.

"We saw a lot of demand at higher prices for our Max offering," CFO Matt Skaruppa said on a post-earnings call.

Duolingo can be accessed without any charge and includes a premium subscription offering and in-app purchases.

The company reported record total bookings of $191 million for the three months ended Dec. 31, up 51%. Paid subscribers grew close to 60% to a record 6.6 million in the fourth quarter.

Shares were trading above $235 in premarket trading, a more than 6% discount to thirteen analysts' median price target of $251.50.

The company's daily active users grew 65% in the fourth quarter, and its monthly active users grew 46% year-on-year in the same period.

"Most of the key metrics are very impressive, hence the positive share price reaction... It has seen big growth in revenue, users, subscribers," said Dan Coatsworth, investment analyst at AJ Bell.

(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Tasim Zahid)