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Investing.com -- Citizens upgraded Duolingo (NASDAQ:DUOL) Inc to “Market Outperform” from “Market Perform,” citing upside potential from the company’s Max subscription model and a more attractive valuation after recent earnings and macro volatility.

The brokerage set a price target of $400, implying a 26% upside from current levels.

“We expect Max to be a driver of pricing gains in 2025 and to benefit subscriber conversion in international markets in 2026 and beyond as the company localizes Max pricing,” Citizens said in a note.

Max, Duolingo’s premium tier priced at approximately twice the rate of Super, contributed 8 percentage points to 2024 subscription bookings growth. With Max now available to 70% of daily active users (DAU) and still in the early stages of promotion, Citizens believes Max’s pricing can continue to drive growth this year.

“Given family plan penetration and the potential for Max and Video Calls, we think these products can more than offset international mix-shift headwinds to pricing, which happened in 4Q24,” the note said.

Brokerage noted Duolingo’s large total addressable market, highlighting that the app’s engaging digital experience appeals to a broad base of learners.

Extrapolating Pew Research’s finding that 73% of Americans consider themselves ‘lifelong learners,’ Duolingo’s opportunity extends to a majority of smartphone users globally, Citizens said.

Citizens’ “Blue Sky” scenario assumes Max drives incremental subscriber growth in 2026 and 2027, leading to potential EBITDA of $680 million by 2027. Under this scenario, Duolingo’s current valuation suggests it is trading at 29x 2026 Blue Sky EBITDA estimates, while the $400 price target implies a multiple of 40x.

Citizens’ $400 price target is based on 15x 2026 estimated revenue of $1.2 billion, implying a 2026 EBITDA multiple of 45x.

The price target multiple is a premium to comps, which we justify given Duolingo’s massive TAM, competitive advantage with freemium, product catalyst in Max, and ramping profitability, Citizens said.

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