Duolingo (DUOL) is poised to benefit from the adoption of generative artificial intelligence in the areas of more effective learning, internal efficiencies and monetization, Morgan Stanley said in a Wednesday note.

"Unlike some Gen AI plays, benefits are not speculative - [Duolingo] has already demonstrated and quantified contribution to both the top-line and bottom-line," the investment bank said.

The firm said that on the revenue side, the company's Gen AI subscription tier Max has already risen to 5% of the subscriber base, while on the cost side, the company boosted course creation about 10 times with a 38% increase in headcount.

Morgan Stanley said gains are likely compounded amid improving Gen AI tools.

"[Duolingo] is a clear Gen AI beneficiary, a rare commodity in SMID Internet," the firm said.

Morgan Stanley initiated coverage on the company with an overweight rating and a $435 price target.

Duolingo shares rose 9.8% in recent trading.

Price: 369.31, Change: +32.97, Percent Change: +9.80