Duolingo Stock Is Overvalued, According to Wall Street. Time to Sell?

After jumping a hefty 43% in 2024, shares of language-learning app Duolingo (NASDAQ: DUOL) are up another 47% so far in 2025. And according to select Wall Street analysts, the stock has simply climbed too far, too quickly.

Stock research platform TipRanks is currently tracking 15 analysts who cover Duolingo stock. Of these analysts, none recommend selling the stock, but their average price target is $476 per share, slightly below where Duolingo is trading as of this writing.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

In other words, Duolingo stock trades above what these professionals believe it's worth. It's obviously time to sell, right? Well, it's more complicated than that.

Image source: Duolingo.

Most Wall Street price targets only take into account the next 12 to 18 months. But for those who want to consistently do well investing in stocks, a long-term view is beneficial.

Investors who hold stocks for five years or more tend to outperform their less patient counterparts. But the buy-and-hold philosophy can't be used indiscriminately. To the contrary, the underlying business still needs to do well during the holding period -- buying and holding businesses with declining fundamentals is still a losing proposition.

Therefore, that's the first thing to consider with Duolingo: Is this business poised to do well over the next five years?

The long-term view for Duolingo

Duolingo is known for its language-learning courses, and that business is absolutely booming. Nearly 47 million people used the platform every single day during the first quarter of 2025, and 10 million people pay for a subscription that offers extra perks, a whopping 40% increase from the prior-year period.

Duolingo's management attributes its success to a variety of factors, but here are two big ones. First, the company does a lot of A/B testing, constantly making changes based on what's working with its users. Second, it also incorporates a lot of game-like elements into the learning process, keeping users motivated and engaged.

Now, Duolingo is taking its language expertise and broadening its focus to other verticals, such as math, music, chess, and more. There's no limit to what the company can do when it comes to launching courses and programs, which greatly increase its market opportunity.

For what it's worth, companies that can easily expand their market opportunity with related products and services often do well over the long term. Revenue growth is important for creating shareholder value, and it's easier to grow the top line when the opportunity is getting bigger.

Since the start of 2022, Duolingo has averaged over 40% quarterly revenue growth, meaning revenue is doubling about every two years. That's extraordinary.

Data by YCharts.

Now, generative artificial intelligence (AI) is helping Duolingo develop new products faster than ever. It launched nearly 150 new language courses in Q1 alone. For some investors, this is a good thing -- the company can expand and grow even more quickly.

For others, however, this technology presents a risk to Duolingo. Generative AI could also make it easier for other companies to offer competing services.

This two-sided risk should be acknowledged, even as Duolingo's business is thriving.

Is Duolingo stock a bargain?

I believe it's safe to say that, trading at nearly 30 times its sales, Duolingo stock doesn't look like a bargain at the moment. The chart below shows that a large portion of the stock's gains this year are due to an expanding valuation multiple, which should always give potential new investors pause.

Data by YCharts. you

The reality is that as Duolingo gets bigger, its growth will likely slow. But even if you assume it sustains a 40% growth rate, the company would generate $4.0 billion in annual revenue by 2029.

With a current market capitalization of $21.9 billion, Duolingo still trades at 5.5 times that 2029 sales forecast. That premium leaves investors with the difficult job of weighing a growing business with sound fundamentals and a large market opportunity against a share price that's increasingly hard to justify.

None of this is to say existing Duolingo shareholders should be selling out of their positions. Personally, I'm waiting on the sidelines for a price that makes sense to me before buying the stock. Those who decide to buy now are best served by maintaining a long-term perspective.

Should you invest $1,000 in Duolingo right now?

Before you buy stock in Duolingo, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Duolingo wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $653,702!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $870,207!*

Now, it’s worth noting Stock Advisor’s total average return is 988% — a market-crushing outperformance compared to 172% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 9, 2025

Jon Quast has no position in any of the stocks mentioned. The Motley Fool recommends Duolingo. The Motley Fool has a disclosure policy.