COUR - Coursera plummets as Cantor downgrades after earnings miss weak guidance

Coursera ( NYSE: COUR ) shares tumbled more than 14% in premarket trading on Friday as investment firm Cantor Fitzgerald downgraded the online learning company after it reported a fourth-quarter earnings miss and weak guidance.

Analyst Brett Knobluach lowered his rating to neutral from overweight and trimmed the per-share price target to $16 from $17, noting that the risk-reward has become "less attractive" at current levels, with the stock up more than 20% year-to-date.

"With revenue growth expected to decelerate [roughly 1,150 basis points] in 2023, we would have expected the company to balance this with bigger profitability improvements, however, management only guided to a 200 [basis point] adjusted EBITDA margin improvement for the full year," Knoblauch wrote.

The analyst added that is likely due to the fact that Coursera's ( COUR ) largest industry partner, widely believed to be Google ( GOOG ) ( GOOGL ), signed a multi-year deal with the company, but on less favorable terms.

In addition, Coursera ( COUR ) is going to spend an additional $25M to support the contract transition, which hurts gross margins by roughly 1,000 basis points that it has generated since 2020, Knoblauch pointed out. With the belief that Google ( GOOG ) ( GOOGL ) will not be the last partner to re-work the contract, Coursera ( COUR ) could see growth slow quicker than expected, he added.

On the plus side, Knoblauch noted that generative artificial intelligence could be a "tailwind" for the company, as Coursera's ( COUR ) management talked about it in a positive light.

"While use case development of generative AI is still in its infancy, we do see a scenario where Coursera can work with industry partners to create content on generative AI, which we expect to be a high-demand offering," Knoblauch added.

Analysts are largely positive on Coursera ( COUR ). It has a BUY rating from Seeking Alpha authors , while Wall Street analysts rate it a BUY . Conversely, Seeking Alpha's quant system, which consistently beats the market, rates COUR a HOLD .

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