What Happened?

A number of stocks fell in the afternoon session after a key inflation report came in hotter than expected, renewing concerns about the path of future interest rate cuts. The Producer Price Index (PPI), which measures wholesale inflation, rose 0.5% in January, significantly higher than the 0.3% anticipated by economists. Even more concerning was the core PPI, which excludes volatile food and energy prices, as it jumped 0.8%, more than double the 0.3% forecast. This surprisingly strong inflation data suggests that the Federal Reserve may need to maintain its restrictive monetary policy for longer than investors had hoped. The prospect of delayed interest rate cuts tends to weigh on growth-oriented sectors like technology, as higher rates can reduce the future value of their earnings, leading to a broad-based sell-off in the sector.

Adding to the weakness for Duolingo, the company reported underwhelming fourth quarter results. Full-year revenue and EBITDA guidance fell short of Wall Street’s estimates. On the other hand, Duolingo blew past analysts’ EBITDA expectations. It also expanded its number of users. Overall, this was a weaker quarter.

Also, the release of key wholesale inflation data showed prices rising more than anticipated, sparking investor concern.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Consumer Subscription company Duolingo (NASDAQ: DUOL) fell 17.4%. Is now the time to buy Duolingo? Access our full analysis report here, it’s free.
• Online Retail company Carvana (NYSE: CVNA) fell 5.5%. Is now the time to buy Carvana? Access our full analysis report here, it’s free.
• Online Retail company Revolve (NYSE: RVLV) fell 5.7%. Is now the time to buy Revolve? Access our full analysis report here, it’s free.
• Online Marketplace company EverQuote (NASDAQ: EVER) fell 5.5%. Is now the time to buy EverQuote? Access our full analysis report here, it’s free.
• Gig Economy company Fiverr (NYSE: FVRR) fell 7.4%. Is now the time to buy Fiverr? Access our full analysis report here, it’s free.

Zooming In On Duolingo (DUOL)

Duolingo’s shares are extremely volatile and have had 44 moves greater than 5% over the last year. But moves this big are rare even for Duolingo and indicate this news significantly impacted the market’s perception of the business.

The biggest move we wrote about over the last year was 4 months ago when the stock dropped 27.4% on the news that the company's weaker-than-expected profit forecast for the fourth quarter overshadowed its strong third-quarter results. The language-learning app posted impressive third-quarter numbers, with revenue of $271.7 million and earnings of $5.95 per share, significantly beating Wall Street's estimates. However, the positive results were undone by the company's outlook. While Duolingo's fourth-quarter revenue guidance of around $275 million was in line with expectations, its forecast for EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), a key measure of profitability, fell short of analyst projections. This disappointing profit outlook signaled potential margin pressure ahead, leading investors to sell off the stock despite the current quarter's success.

Duolingo is down 44.3% since the beginning of the year, and at $98.21 per share, it is trading 81.8% below its 52-week high of $540.68 from May 2025. Investors who bought $1,000 worth of Duolingo’s shares at the IPO in July 2021 would now be looking at an investment worth $706.52.

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