2024-07-30 05:24:49 ET
Coursera (NYSE: COUR) stock price has been highly volatile since Friday last week. It initially went parabolic, soaring to a high of $11.73 after publishing robust quarterly results. On Monday, it reversed some of those gains as it crashed by almost 13% after receiving a downgrade from Goldman Sachs.
Strong financial results
Coursera is a leading company in the ed-tech space. It provides a platform where educators and institutions can post their materials and reach millions of students from around the world. It has over 142 million learners, making it one of the biggest learning institutions globally.
Coursera and other ed-tech companies like Udemy and BYJU thrived during the pandemic as schools closed around the world. Many people embraced online platforms to learn and even access health, as evidenced by Teladoc’s growth at the time.
The past few years have been tough for companies that thrived during the pandemic like PayPal and Block. Coursera itself has been in a freefall as the stock has tumbled by over 56% from its highest point this year. It has also dropped by over 85% from its all-time high.
Coursera published strong financial results that beat the consensus view. Its revenue rose by 11% in the second quarter to over $170 million. Its gross profit jumped to $90.3 million while its net loss improved to $23 million from $31.7 million in the same quarter a year earlier.
Most of its revenue came from its consumer division whose revenue rose by 12% to $97.3 million. Its enterprise revenue rose by 8% while its degrees division’s revenue jumped by 14% to $14.3 million.
Coursera hopes that its business will continue thriving in the coming months. It expects that its revenue will be between $171 million and $175 million while its adjusted EBITDA will be between $0 and $4 million.
For the full year, Coursera hopes that its revenue will be between $695 million and $705 million. These are strong numbers considering that the company’s revenue stood at over $184 million in 2019.
Therefore, most analysts have a bullish outlook for the Coursera stock price. Some of the most bullish ones are from Cantor Fitzgerald, BMO Capital, RBC, and Telsey. The average stock target for Coursera is $15, up from the current $9.34.
However, one prominent analyst from Goldman Sachs believes that the stock is still overvalued. In a note on Monday, he maintained his sell rating and placed a target of $9, where it dropped to on Monday.
Risks and opportunities
Coursera has some positives that could see its stock bounce back in the next few days. First, the company is still growing even after the Covid-19 bump. Analysts expect that its annual revenue will hit $699 million this year, a 10% increase from what it made in $635 million. For next year, the company is expected to make $786 million. The company could beat the analysts’ estimates as it has done in the past.
Second, Coursera is on the path toward profitability. Its annual net loss has dropped from over $175 million in 2022 to over $116 million in 2023. It then narrowed to $96.7 million in the trailing twelve months (TTM).
Analysts believe that the company will turn a profit this year. They expect that its profit will rise to $0.21 and $0.28 per share in 2024 and 2025. It has room to grow its margins since it has a gross margin of 52.30%, higher than the sector median of 36%.
Third, it seems like an undervalued company considering that it has a market cap of over $1.67 billion. It has a forward EV-to-sales ratio of 1.38, lower than other companies in the ed-tech industry.
A good example of this is Pluralsight, which had $0.39 billion in revenues in 2020 and $0.31 billion in 2019. It was acquired by Vista Equity Partners in a $3.5 billion deal. Coursera is a bigger company, meaning that it should attract a higher valuation.
However, the risk for Coursera is in a highly competitive industry. Some of its top competitors are companies like edX, Udemy, Udacity, FutureLearn, Skillshare, Codeacademy, and Pluralsight. The other risk is that its revenue growth will not be as strong as it was a few years ago.
Coursera stock price forecast
COUR chart by TradingView
The daily chart shows that the COUR share price bottomed at $6.36 in June and then bounced back to a high of $11.73 on Friday. It then retreated to $9.3 after the Goldman Sachs downgrade.
The stock remains above the 50-day moving average, a bullish sign. Also, the Relative Strength Index (RSI) has moved below the overbought level. Therefore, the stock will likely continue rising as buyers target this month’s high of $11.73. A break above that level will point to more upside in the coming weeks.
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