Duolingo Stock Plunges 64% in a Year: Should You Sell It Now?

Duolingo, Inc. DUOL stock has plummeted 63.8% over the past year against the industry's 23.7% rally and the Zacks S&P 500 composite's 24.6% growth.

DUOL has failed to beat its industry peers, Amprius Technologies, Inc. AMPX and LiveRamp RAMP, over the past year. Amprius Technologies and LiveRamp have grown a whopping 868.3% and 17.9%, respectively.

1-Year Share Price Performance

A similar stock trajectory has been observed over the past six months. While Duolingo has plummeted 67.5%, Amprius Technologies and LiveRamp have gained 117.7% and 9.8%, respectively.

Let us analyze this stock to find out whether it is time for investors to sell their positions.

DUOL’s Imminent Near-Term Financial Cool-Down

During the fourth-quarter 2025 earnings call, Luis von Ahn Arellano, the CEO, stated that daily active users decelerated throughout 2025 and expects 20% year-over-year growth throughout 2026. This slowdown has crept into the revenue trajectory, where management expects it to grow 15-18%, a significant letdown from the 39% registered in 2025.

The company is compelled to prioritize top-of-funnel growth over aggressive monetization to battle the deceleration, resulting in a conservative booking increase forecast of 10-12% for 2026. It suggests a significant slack from the 33% year-over-year rally reported in 2025.

Investments made in 2026 are expected to heighten R&D and sales and marketing expenses, surpassing revenue growth. This could affect the trajectory of adjusted EBITDA margins, leading to a nearly three-point sequential decline in the second quarter of 2026.

Management expects margins to improve through the second half of 2026. These factors signal a certain near-term financial deceleration as Duolingo resets its operational baseline to win on the long-term scalability and sustainability.

Duolingo’s Overvaluation: Threat to Investor Returns

DUOL's valuation is high, trading at 32 times forward 12-month earnings per share, well above the industry average of 22.44 times. Additionally, it is valued at 3.71 times forward 12-month sales, exceeding the industry average of 2.44 times. These metrics clearly indicate the stock’s overvaluation, implying increased risks of capital loss due to a diminished margin of safety, which acts as a cushion for market downturns.

DUOL’s Dividend Absence Cuts Safety-Net During Downturns

Duolingo does not delve into the dividend play, which is a massive drawback for investors seeking total return stability. Shareholders are fully dependent on price appreciation, which is not a guaranteed phenomenon.

Investors could perceive a zero-dividend policy as management being highly inclined toward high-risk reinvestment over returning value. DUOL, a maturing company operating within the AI domain, leaves investors vulnerable to downturns if growth targets are passed over, offering zero compensation for risk exposure.

Duolingo’s Bleak Outlook With Bearish Analyst Sentiments

For 2026, the consensus estimate for EPS is at $3.08 per share, suggesting a 64.1% plunge from the year-ago quarter’s actual. Over the past 60 days, five 2026 EPS estimates have moved downward with no upward adjustment. During the same period, the Zacks Consensus Estimate for 2026 earnings has dipped 34.4%, highlighting a lack of analyst confidence.

Verdict: Sell Duolingo Now

Duolingo has delivered an exceptional financial performance in the fourth quarter of 2025, which is anticipated to take a hit in the near term. The recent earnings call revealed expected financial slowdown in the form of decelerating DAU and revenues. To combat the slowdown, investments are to be made in 2026, which could affect margins in the first half of 2026.

A lack of dividend yield is a waving red flag for investors, which, when combined with overvaluation and a lack of analyst confidence, exposes investors to return instability. Hence, we recommend investors holding this stock sell off their position. Potential investors are advised not to invest in Duolingo for now.

DUOL has a Zacks Rank #5 (Strong Sell) at present.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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