COUR - Checking Out Coursera

2023-12-31 10:21:28 ET

Summary

• Today, we take a deeper look at Coursera, Inc., an online education provider with profitability on the horizon and solid revenue growth.
• Insiders have been selling a significant number of shares, but the company has a strong cash position and is projected to narrow losses and achieve profitability in the near future.
• An analysis around this mid-cap firm trying to transform the online education space follows in the paragraphs below.

Education is the kindling of a flame, not the filling of a vessel ." -Socrates

Today, we put Coursera, Inc. ( COUR ) in the spotlight for the first time. This online education provided has profitability on the horizon and is delivering solid revenue growth. The company also has a rock-solid balance sheet. However, analyst firms are mixed around Coursera's current prospects and the stock is seeing some significant sales from insiders. An analysis follows below.

Company Overview:

Coursera, Inc. is headquartered just outside of San Francisco in Mountain View, CA. The company operates an online educational content platform that connects learners, educators, organizations, and institutions. It offers individual courses as well as certificate and degree programs. The stock trades just below twenty bucks a share and sports an approximate market capitalization of $3 billion.

The company has three main revenue segments: The Consumer, Enterprise and its degree programs.

Third Quarter Results:

The company posted its Q3 numbers on October 26th. Coursera posted a GAAP loss of 21 cents a share, a nickel a share better than the consensus. Sales rose just over 21% on a year-over-year basis to $165.5 million, which beat expectations by just over $6 million. Management also boosted revenue guidance for FY2023 to between $628 million to $632 million, the consensus at the time was $621 million within the analyst community.

Consumer revenue came in $99 million, up 27% from the same period a year ago. Management credited newly launched entry-level Professional Certificates created by Google, IBM, and Microsoft as key parts of the impressive growth.

Enterprise revenues rose 14% to $54.9 million. The number of paid enterprise customers ended the quarter at 1,315, up 21% from 3Q2022 and Coursera's net retention rate among these customers was 99%.

Degree revenue was up 13% to $11.7 million, while the company's degree population grew 15% to just over 20,000.

Analyst Commentary & Balance Sheet:

Since third quarter results were posted, 11 analyst firms including Morgan Stanley and BMO Capital have reissued/assigned Buy/Outperform ratings on the stock. Price targets proffered range from $21 to $30 a share. Raymond James, Truist Financial ($17 price target), Goldman Sachs ($16 price target), and UBS ($18 price target) have maintained Hold ratings on the shares.

Just over five percent of the outstanding float of the shares is currently held short. Insiders have been frequent and considerable sellers of the shares throughout 2023. In the fourth quarter, they disposed of approximately $25 million worth of share collectively. The company ended the third quarter with just under $720 million worth of cash and marketable securities according to the 10-Q the company filed for the quarter. Coursera had a GAAP net loss of $32.1 million for the quarter and a non-GAAP net loss of only $2.1 million. The company has no listed long-term debt. Free cash flow was $15.6 million in the third quarter of this year, compared to just $1.3 million in 3Q2023.

Verdict:

Coursera, Inc. posted a non-GAAP loss of 36 cents a share in FY2022 on just under $524 million in sales. The current analyst firm consensus sees losses narrowing to a nickel a share in FY2023 as sales rise just over 20% to $631 million. They project a small profit of four cents a share in FY2024 as revenues increase 15%.

There is a lot to like about Coursera's scalable business model and the company should continue to benefit from the growth in the virtual workforce and the increasing need for certifications for many positions. The company is aiming at a very large potential market and has a solid balance sheet as well.

That said, revenue growth is expected to slow in FY2024 and the economic outlook for 2024 is uncertain. The large amount of insider selling in the stock is also disconcerting. Therefore, Coursera seems a story to keep an eye on, but I am passing on any recommendation on the stock until it becomes consistently profitable. This is a name we will circle back on at some point in the second half of 2024 to see how Coursera is progressing.

Being a student is easy. Learning requires actual work ." -William Crawford

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