Investing.com -- Evercore ISI upgraded Duolingo to Outperform from In Line, arguing that recent product improvements and accelerating user growth could drive a stronger earnings trajectory than Wall Street currently expects.

The brokerage also more than doubled its price target to $210 on the stock.

The brokerage said its new target implies more than 40% upside from the shares' Aug. 31 closing price of $146.98. It also raised its 2027 and 2028 earnings-per-share estimates to 10% and 25% above consensus, respectively, citing its proprietary survey, third-party user data, product analysis and recent channel checks.

Evercore's latest survey of 1,300 U.S. language learners showed the company maintaining a dominant position in the category, with 53% of respondents using its service, compared with 13% for closest pure-play rival Babbel. User satisfaction also improved for a third straight year, with 66% of respondents saying they were extremely or very satisfied.

The brokerage said artificial intelligence remains a competitive risk, with 36% of language learners using ChatGPT. However, more than half of those ChatGPT users also use Duolingo, and 63% of the overlapping users engage with Duolingo daily, suggesting AI adoption has not materially weakened the platform's user habit.

Recent product launches are also supporting the bullish case. Evercore highlighted free speaking practice, Speaking Adventures, spoken tokens, Flashcards and the expansion of Video Call from the Max tier to Super. It said Duolingo's current user retention rate reached an all-time high of 84%, while the share of surveyed users using the app daily rose to 65% from 61% a year earlier.

Third-party data points to further acceleration. SensorTower is tracking 17% year-on-year daily active user growth in the third quarter so far, up from 12% in the second quarter. Evercore expects DAU growth of 24% in the third quarter and 27% in the fourth, supporting management's goal of reaching 100 million DAUs by 2028.

Evercore now forecasts about 99 million DAUs in 2028, versus 85 million for the Street. It estimates 2028 revenue of $1.79 billion and adjusted EBITDA of $530 million, 17% and 22% above consensus, respectively. Its 2028 GAAP EPS estimate of $5.10 is 24% above the Street's $4.10 estimate.

The brokerage's sensitivity analysis suggests that 100 million average DAUs, combined with annual revenue per user of $18-$22 and operating margins of 15%-19%, could generate GAAP EPS of $4.77-$6.94, well above the Street's current 2028 estimate of $4.18.

Evercore said the key risk to its bullish thesis is monetization. Revenue per average DAU was about $20 in the second quarter, down 4% year-on-year, while bookings per DAU fell about 12%. The brokerage also flagged competition and uncertainty around pricing and conversion as risks.