Will Coursera Stock Go Up?

Coursera Inc (NYSE:COUR) debuted on the New York Stock Exchange through its March 31, 2021 IPO. The e-learning company is part of $226 billion industry expected to grow to $370 billion by 2026.

The topsy turvy world over the past few years sparked a rush to e-learning as those stuck at home sought ways to improve their lives through education.

What does this mean for COUR share price? Will Coursera stock go up?

The platform partners with both universities and corporations, and its registered user base (called learners) continues to grow. Its 76.6 million learners in 2020 represented a 65.1 percent increase from the prior year’s 46.4 million learners. Now with over 87 million registered learners it’s well on its way to 100 million.

This growth may not be sustainable, but more concerning for investors is the fact that Coursera has not yet turned a profit. Translation: there could be a long runway to go for investors before enjoying a decent ROI. A looming cloud on the horizon is whether engagement will diminish as rapidly as it grew when restrictions are lifted more extensively.

And then there’s competition waiting to eat its lunch. 

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Coursera Has Titans Of Industry As Partners

Coursera is an e-learning company founded in 2012 by Andrew Ng and Daphne Koller, two Stanford professors. It quickly signed up Stanford, Princeton, and other universities. Soon it expanded to include courses designed for professionals in business and government organizations.

Today, it offers a slew of courses to provide degrees or professional certifications. Partners include Google (GOOGL), IBM (IBM), Amazon (AMZN), Autodesk (ADSK), and over 250 universities and companies in 50+ countries. There are over 8,000 courses available on Coursera’s platform.

It had steady user growth in the low- to mid-20 percent year-over-year before lockdowns took effect. Growth rates catapulted higher to the tune of almost 3x in the intervening years. It’s so impressive, few expect it can be sustained for long.

Coursera’s Profitability

Coursera (COUR) has three main revenue sources:

  • consumers,
  • enterprise, and
  • degrees.

The company charges a monthly subscription fee for access to its learning platform, while also collecting fees from schools to use their platform.

This has helped the company rake in $293.5 million in 2020, a 59 percent increase from the prior year. However, it still registered a net loss of $66.8 million, according to its IPO prospectus.

Profitability continues to allude the company. It’s pouring much of its revenue into building the business. For the early adopters, the time to buy is before the company turns the profitability corner, and ideally before the market as a whole gets wind of which quarter will signal the seismic shift from being in the red to the black.

By the third fiscal quarter, the company logged $67.7 million in revenue, a 55 percent increase from $43.7 million in the prior year’s quarter. And it had $7.1 million in free cash flow while projecting around $410 million in revenue for the full year.

That leaves a dangling question.

Is Coursera Stock A Buy?

Despite its successes, Coursera stock struggled to impress investors in its first post-IPO year. Seven months later, it still trades near its IPO price, though along the way it has taken investors on a wild ride.

A big problem is the lack of a clear future economically – will the world open up or will learning from home be the future?

It doesn’t help investor sentiment that the company operated at a $97 million loss in the first nine months of the fiscal year.

Still, the company has a healthy balance sheet, and it raised its cash on hand to over $800 million by the end of the third quarter. This includes over $525 million in proceeds from its IPO, which is a huge leap from the $79.9 million it ended with in 2020.

Coursera Financial Outlook

Coursera’s full-year guidance is for revenue over $400 million, and it already has over $300 million heading into the final quarter. This exceeds previous guidance of around $380 million. 

Its consumer division is the largest, generating $66.5 million in revenue in the most recent quarter. Enterprise brought in $31.8 million, and degrees accounted for $11.6 million.

Coursera’s continuing to expand with new courses offerings from IBM Data Engineering, Oracle (ORCL), and Juniper (JNPR). It also offers new online degrees from top universities in the U.S., India, and London. And it is expanding partnerships with BBVA, Expedia (EXPE), and Zurich Insurance Group.

It also launched a new Leadership Academy using its proprietary SkillSets platform, which is expanding to universities. This could result in a big growth lever and a handsome return for investors who get in early.

Valuation Is A Concern

Coursera valuation is causing some investors to fret, trading at over 11x its trailing twelve month revenue. This premium leaves little room for a bad quarter, especially with investors already somewhat cool on the stock. When the growth eventually subsides, it could spell trouble for COUR share price.

CEO Jeff Maggioncalda understands this and warned that moving forward, it will be difficult to compare the company’s performance to pre-pandemic levels. This could make the stock even more volatile in the near future, but there may be clearer skies ahead so long as the company can stay ahead of competitors like Numerade, Degreed, Teachable, and Duolingo (NASDAQ:DUOL).

Is Coursera Stock A Buy? The Bottom Line

Coursera is an online learning platform that has reported explosive growth over the past couple of years. Even prior to that, it was consistently showing 20-25 percent user growth annually. This has bullish investors confident that the company will continue its trajectory.

A big question is whether it will return to that pace in the future or dip lower as it begins to reach peak market penetration. And because the stock is trading at a premium, investors should be wary of a bad quarter.

Still, it has solid financials that should allow it to weather any oncoming storms over the next five years, making COUR an attractive buy and hold candidate.

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