Duolingo Inc (DUOL) experienced a significant stock surge on Wednesday, climbing over 8% thanks to a wave of bullish price target revisions from top analysts. Needham increased its price target to $310, JMP Securities set a new target at $275, Bank of America followed with an increase to $298, and JPMorgan rounded out the optimistic assessments with an upward revision to $303.
This surge in investor confidence stems from Duolingo’s strategic implementation of generative AI and large language models (LLMs). JPMorgan analyst Bryan M. Smilek stated, “We believe Duolingo is leveraging GenAI/LLMs to achieve its goal of teaching as effectively as a human tutor.” These technologies are “transforming the learner experience, increasing the velocity of product optimizations & content development, deepening teaching efficacy, & driving cost efficiencies,” he adds.
However, the positive analyst outlook isn’t the only factor driving the stock’s momentum. Duolingo’s short interest metrics could also be setting the stage for a thrilling trading environment. With a short interest of 5.8%, a moderate level of bearish sentiment suggests some investors are betting on a price decline. The days to cover stands at 5.82, meaning it would take almost six days of typical trading volume to cover all short positions. This scenario presents a ripe opportunity for a short squeeze if the stock continues to climb.
Adding to the excitement, Duolingo’s extremely low float of around 35-40 million shares makes it highly susceptible to significant price swings. With daily volumes typically under half a million shares, even a minor buying or selling spree could lead to major fluctuations, amplified by large bid/ask spreads.
While Duolingo is currently riding high on positive analyst sentiment, traders should remain vigilant regarding short interest dynamics. If the stock continues its upward trend, the potential for a short squeeze could lead to a wild ride, making this a thrilling stock to watch in the days ahead.
