Duolingo stock fell for the fourth straight trading day on Wednesday as data shows user growth slowing for the language-learning software provider.
"Duolingo's growth continued softening in June, furthering a pronounced slowdown in April," Jefferies analyst John Colantuoni said in a client note.
Growth of daily active users (DAUs) on Duolingo's mobile app decelerated to 37% year over year in June, he said. That's down from 40% in May, 41% in April, 53% in March and 56% in February.
Consensus estimates for Duolingo's second quarter predict 44% growth in daily active users on a year-over-year basis. But the quarter-to-date trend is a 39% increase, Colantuoni said.
"We are concerned the Q2 deceleration may be the result of Duolingo's poorly received AI-driven hiring announcement in late April (later clarified in late May)," he said. "We are optimistic that paid subscribers could be stickier than DAUs given greater habituation and the prevalence of annual contracts."
Colantuoni reiterated his hold rating on Duolingo stock with a price target of 500.
On the stock market today, Duolingo stock tumbled 5.9% to close at 397.68.
Duolingo Stock Trips Sell Signal
On Monday, Duolingo stock fell below its 50-day moving average line, a key sell signal.
The stock has now round-tripped from its May 2 breakout from a cup base at a buy point of 441.76. It hit an all-time high of 544.93 on May 14, which is in the 20%-to-25% profit-taking zone, based on IBD trading principles.
Also Wednesday, DA Davidson analyst Wyatt Swanson slashed his price target on Duolingo stock to 500 from 600, but kept his buy rating.
He noted that the "'AI-first' backlash" on social media is hurting Duolingo's brand sentiment. However, he expects the impact to be temporary.
Duolingo is on the IBD Tech Leaders list.
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