Duolingo, Inc. (DUOL) shares jumped after Bank of America Securities upgraded the stock from Neutral to Buy, making a case that Wall Street is seriously underestimating what the company actually is.

The Entertainment Thesis

Here's the pitch: Duolingo isn't just an education app competing in the language-learning space. It's also an entertainment product fighting for attention during those five-minute pockets of dead time throughout your day.

According to Investing.com, Bank of America argues the market is missing this dual nature. The firm said Duolingo operates in two massive markets simultaneously—education, where people pay to learn languages and skills, and entertainment, where users kill time with casual mobile games during coffee breaks and commutes.

That entertainment angle isn't baked into current growth forecasts, the analysts say. And the numbers back up their argument. Duolingo boasts roughly 95% annual subscriber retention and a payer-to-daily-user ratio of about 23%, metrics that stack up impressively against mobile gaming apps.

A Bigger Addressable Market

Bank of America estimates Duolingo could potentially reach approximately 3 billion people worldwide who play casual mobile games. The firm pointed to a massive audience looking for apps to fill short gaps in their day, a need the company meets by blending gaming-style mechanics with actual learning.

The brokerage did trim its price target to $250 from $301, but maintains the stock looks inexpensive relative to its long-term outlook. Notably, Bank of America said it values Duolingo based on earnings rather than sales, citing the company's profitability and its discount compared with other fast-growing subscription and consumer entertainment apps.

Price Action: Duolingo stock closed 4.91% higher at $185.15.