markets

Matt Phillips9/17/25

Duolingo slips after Citi analysts trim price target and product announcements receive muted response

Duolingo dropped in early trading after Citi analysts snipped their price target to $375 from $400, citing, in part, some disappointment with announcements at Duolingo’s Duocon convention Tuesday, as well as deceleration in the growth of daily active users (DAUs) that continued into August.

Among other changes, the company announced improvements to its video call service — where language learners can practice their target language with an AI version of Duolingo characters — as well as enhanced offerings of its chess product, which it will expand to Android and offer in more languages, including Chinese.

“This year’s product announcements had a lower profile,” Citi analysts wrote, adding that they still “expect the video call improvements, better engagement drivers, and broader use case for chess to help drive better user growth trends.”

Still, Citi’s analysts pointed to decelerating year-on-year growth in key app metrics like downloads for their price target cut. Data from third-party groups that track app usage shows that the slowdown in the growth rate of daily active users, which seemed to stem from a social media backlash to an artless LinkedIn post from the company, continued through August.

“Duolingo DAU growth trajectory remains [the] key investor debate,” analysts at JPMorgan wrote in a note on Duolingo published Wednesday.

Through the end of August, DAU growth was 25% year on year, according to third-party data. That’s down from 31% in July, JPM said.

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Helena Cheng23h

Lululemon’s stretch getting tested: Stock plunges after after outlook is cut

Lululemon shares are down double digits in premarket trading after the company cut its full-year sales and profit outlook, overshadowing a Q1 beat and raising fresh concerns about the brand’s turnaround efforts.

The company now expects fiscal 2026 revenue to be flat to down 1%, compared with its prior forecast for 2% to 4% growth. Guidance for full-year diluted earnings per share was dragged down to a range of $10.95 to $11.15, below the company’s previous guidance of $12.10 to $12.30 and well below Wall Street’s estimate of $13.26.

Key numbers for Q1:

EPS of $1.69 vs. the $1.68 expected.
Revenue of $2.47 billion vs. the $2.43 billion expected.

The modest top-line beat masked a widening divergence between Lululemon’s geographic markets. While international revenue rose 22% overall with a 30% increase in Mainland China, the bigger problem remains North America, where revenue fell 5%.

Interim co-CEO and CFO Meghan Frank acknowledged during the earnings call that recent product rollouts underperformed. A highly anticipated yoga campaign failed to generate its expected “halo effect” across broader product lines.

Profitability metrics took a major hit, with gross margins contracting by 410 basis points to 54.2% due to mounting tariff costs and promotional markdowns. Operating income consequently fell 37% year over year to $276.9 million.

“We experienced spikes of negative commentary in the media and on social channels with regard to our brand, which had an impact on traffic and overall top-line performance,” Frank said during the earnings call. “And second, not all of our product launches have met our expectations. While we have had several successful launches so far this year, we have seen others as we start Q2 not generate the anticipated guest response.”

Lululemon’s valuation has already been steadily compressing for years. While it was once one of retail’s richly valued stocks, investors have been questioning whether the company can return to the double-digit growth era.

The results also arrive during a leadership transition. Lululemon announced back in April that former Nike executive Heidi O’Neill is set to take over as CEO in September, with investors looking to her to revive growth in North America and restore the brand’s growth.

As Lululemon faces both macroeconomic pressure and brand-specific challenges, its stock has dropped around 40% year to date.

markets

US job growth skyrocketed in May, blasting past expectations

The US economy added 172,000 jobs in the month of May, the Bureau of Labor Statistics reported Friday, sending 10-year Treasury yields higher.

The strong May job market surprised economists. Experts had predicted only 85,000 new jobs — just half the reported number. The unemployment rate held steady at 4.3%, as expected.

The job growth story is a hopeful spot for the economy as consumers continue to feel inflationary pressure from the Iran war.

Job gains were buoyed by the leisure and hospitality sector, which added 70,000 jobs, as well as local government, healthcare, and education.

Both the March and April jobs reports were revised upward, making them collectively 93,000 higher than previously reported.

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