Duolingo and Sea Limited have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – March 6, 2024 – Zacks Equity Research shares Duolingo DUOL as the Bull of the Day and Sea Limited SE as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Maxeon Solar Technologies Ltd. MAXN, Nextracker NXT and First Solar FSLR.
Here is a synopsis of all five stocks.
Bull of the Day:
Duolingo is a Zacks Rank #1 (Strong Buy) that provides a mobile language learning platform. The company offers courses in 40 different languages, including Spanish, English, French, German, Italian, Portuguese, Japanese, and Chinese through its Duolingo app.
The stock has recently rallied, moving close to all-time highs after a big earnings beat. With analysts raising both earnings estimates and price targets, investors should be targeting any dip in the stock for a longer-term move higher.
About the Company
Duolingo was incorporated in 2011 and is headquartered in Pittsburgh, Pennsylvania. The company has about 700 full-time employees and a market cap of $9 billion.
Duolingo primarily generates revenue through a freemium model but also has a Duolingo Plus subscription that offers customers additional features, such as an ad-free experience, offline access to lessons, progress tracking, and more. The company also offers a version for schools and certification exams.
The stock has a Zacks Style Score of “A” in Growth and “A” in Momentum. It sports a Style Score of “F in Value, with a Forward PE of 183. So for value investors, this is not a stock for you and the rapid growth will be the focus for most investors.
Q4 Earnings Beat
On February 28th, the company reported a 24% earnings surprise to the upside, which was the ninth straight EPS beat.
Q1 revenues were raised to $164-167M v the $158M expected. With that, the company saw record bookings and paid subscribers jumped 57% year-over-year to 6.6 million.
Duolingo had 26.9 million daily active users during the quarter, up 65% year-over-year, and 88.4 million monthly active users, up 46% year-over-year.
The stock shot higher on the headline, moving to all-time highs. However, is has sold off since as that valuation remains a concern.
Analyst Estimates
Since earnings, analysts have been hiking estimates and price targets. Let’s go over what estimates have done over the last 7 days and then look at some price targets.
For the current quarter, analysts have hiked their estimates from $0.13 to $0.30, a jump of 130%.
For the current year, estimates have gone from $0.81 to $1.22, a jump of 50%.
The momentum looks to continue next year, with numbers going from $1.49 to $2.26, or 52%.
After the earnings report, Piper lifted its price target from $217 to $282. Here are some comments from the analyst note:
Duolingo’s results came in well-above expectations, supported by gravity defying DAU growth, and a steady increase in monetization. In our view, underpinning
these impressive metrics is Duolingo’s early investments in AI, consistent execution and an incredible brand. We see upside to FY24 targets, and thereby reiterate our OW view on DUOL, supported by higher estimates and multiple.
Others that upped their targets included Barclays which went from $173 to $243 and UBS which lifted to $275, up from $230.
Goldman still held its Sell rating but lifted its target to $190 from $160.
The Technicals
After the headline earnings release the stock traded as high as $260, technically making a new all-time high. From there the stock sold off and was unable to make new highs during market hours.
So far, the stock has drifted lower after the impressive results, so let us go over some buyable levels for investors to enter long-term.
Looking at moving averages, the 50-day is at just over the $200 mark, while the 21-day is at $193. The stock gapped from the $198 area so a move under that $200 spot would be a gap fill.
Looking at Fibonacci levels, we have the halfway back level at $206 and the 61.8% at $198. This can be found by drawing the 2/21 lows to the 2/29 highs.
If the stock retakes the all-time highs at $245, investors can target the $290-300 area for profits. The 161.8% extension is $292 and can be found by drawing all-time highs to 2024 lows.
Bottom Line
Duolingo has a product offering that is being received well by its customers. The DAU and sub-growth look to be gaining momentum and the bottom line is showing investors results.
If the growth can continue through the year, the stock should have no problem taking out the recent highs and moving toward the $300 level.
Bear of the Day:
Sea Limited is a Zacks Rank #5 (Strong Sell) that engages in the digital entertainment, e-commerce, and digital financial service businesses in Southeast Asia and internationally.
The former high-flying stock continues to struggle as earnings consistently disappoint. While the stock is well off its 2021 highs, investors should be patient with the name until estimates start trending in the right direction.
About the Company
Sea Limited was founded in 2009 and is headquartered in Singapore. The company offers an online gaming platform Garena, an e-commerce platform Shopee, and a digital financial services platform SeaMoney
SE is valued at $30 billion and has a Forward PE of 38. The stock holds Zacks Style Scores of “F” in both Value and Growth. The company pays no dividend.
Q4 Earnings
Sea reported on March 4th, missing expectations by 150%. This was the second miss in a row, with an 89% miss coming in the last quarter. The company does not have a great track record of earnings beats, missing 11 out of the last 16 quarters.
On the positive side, revenues came in above expectations and the company posted its first annual profit since its IPO. However, EDIBTA was 126.7M, down from $495.7M last year. While this was above expectations, the stock moved lower after a reactionary move higher.
Earnings Estimates
While some analyst commentary was positive in the idea that the company is starting to make money, estimates are still trending lower. With the stock up almost 40% in 2024 investors should be cautious until this trend is broken.
Over the last 90 days, the current quarter estimates have fallen from $0.22 to $0.13, a drop of 41%. For the current year, estimates have ticked higher since EPS, but dropped from $1.60 to $1.40 over the last 90 days, a drop of 13%.
Technical Take
Sea traded as high as $372 in 2021 and fell to a low of $34.25 in early January. The stock is trading up over 60% off those lows, so the slight improvement in earnings was likely already expected from the market.
The bulls have broken the 200-day MA, which is a positive sign. However, the $60 level was resistance during the summer of 2023 and should be a roadblock for the bulls.
Investors should look for a pullback if interested in the name. The 200-day MA is at $45, 18% below current trading levels. This also lines up with a 50% retracement found by drawing 2024 lows to recent highs.
In Summary
Sea Limited is starting to show some signs of improvement on the bottom line, posting its first annual profit since the IPO. However, investors seem to be getting ahead of themselves as the stock is up 60% in under two months.
Additional content:
Embrace Clean Energy with These 3 Shining Solar Stocks
There has been a heightened need to shift to solar energy in the fight against greenhouse gas emissions. The transition from fossil fuels to renewable energy is creating opportunities for investors, although it will take huge investments and a lot of time. Amid the backdrop, Maxeon Solar Technologies Ltd., Nextracker and First Solar are well poised to gain.
Solar Contributes More to New Generating Capacity
Renewables is witnessing its share of electricity generation in the United States growing at a rapid pace. In its latest short-term energy outlook, the U.S. Energy Information Administration (“EIA”) states that the proportion of renewables in electricity generation in the domestic market will increase to 24% this year from last year’s 22%. Meanwhile, the share of coal has been estimated to decrease to 15% from last year’s 17%.
Almost all the regions of the United States in 2024 will see increasing electricity generation from renewable sources, thanks to the increase of 36 gigawatts of solar generating capacity, as estimated by EIA. This year will see a 43% rise in electricity generation from solar energy, added EIA.
3 Stocks to Gain
Thus, it is time for investors to keep an eye on solar energy stocks. We have zeroed in on three such stocks.
Maxeon Solar is a key player in solar innovation and channels. As a key provider of premium solar technology, Maxeon Solar is continuing its innovation work that is leading to its seventh generation of advanced IBC solar technology. Carrying a Zacks Rank #3 (Hold), MAXN is capitalizing on off-grid applications since solar is being utilized for transportation to charge a growing number of devices that could power human lives.
Nextracker is expected to experience growth due to its provision of intelligent, integrated solar tracker and software solutions. Strong balance sheet, substantial backlog and widespread global demand are the main factors driving the company’s success. Currently, Nextracker sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
To accelerate its fight against global warming, First Solar is primarily engaged in providing eco-efficient solar modules. The advanced thin-film photovoltaic modules of First Solar, with a Zacks Rank of 3, represent highly advanced solar technologies of the next generation.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
https://www.zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index.Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
First Solar, Inc. (FSLR) : Free Stock Analysis Report
Sea Limited Sponsored ADR (SE) : Free Stock Analysis Report
Maxeon Solar Technologies, Ltd. (MAXN) : Free Stock Analysis Report
Duolingo, Inc. (DUOL) : Free Stock Analysis Report
Nextracker Inc. (NXT) : Free Stock Analysis Report
