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On Friday, Cantor Fitzgerald analyst Brett Knoblauch increased the price target for Nerdy (NYSE:NRDY) to $1.50 from the previous $1.00 while maintaining a Neutral rating on the stock. The revision comes after Nerdy’s year-end results for 2024 showed a stabilizing performance despite a turbulent period for the education technology sector. With a current market capitalization of $286.8 million and annual revenue of $190.23 million, the company managed to surpass FactSet consensus expectations in several key financial metrics, including revenue, operating income and margin, earnings per share (EPS), and free cash flow. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations, despite facing profitability challenges with a negative EPS of -$0.38 over the last twelve months.
Knoblauch noted that the fourth quarter of 2024 marked a modest turnaround for Nerdy, following two consecutive quarters of lowered guidance. This improvement was seen as a slight redemption for the company. The analyst attributes the positive momentum to the launch of a series of artificial intelligence (AI) products aimed at enhancing the learning experience. These products include AI-Driven Summarization & Insights, Next-Gen AI Lesson Plan & Practice Problem Generators, and Tutor Copilot.
The new AI offerings are expected to be pivotal in driving growth for Nerdy, particularly within the Consumer segment, as 2025 unfolds. The use of AI is not only seen as a way to provide better services to customers but also as a means to improve the company’s operational efficiency. Knoblauch pointed out that Nerdy’s current staffing levels are sufficient for the year, indicating that the company is effectively leveraging AI to optimize its operations.
In addition to product innovation, Nerdy has been actively enhancing its go-to-market strategies. The analyst observed that new sales talents hired in 2024 are "seasoning" and will likely contribute to generating a more robust deals pipeline as they gain experience. Management’s strategic focus on AI is believed to be central to both serving customers and achieving better economic outcomes.
As the sales force gains maturity in experience and pipeline development, Cantor Fitzgerald anticipates that Nerdy’s growth could reaccelerate in the latter half of 2025. The firm’s outlook suggests that these operational and strategic developments could potentially lead to improved performance for Nerdy in the future. For deeper insights into Nerdy’s financial health and growth potential, investors can access comprehensive analysis and additional ProTips through InvestingPro, which offers detailed research reports covering over 1,400 US stocks.
In other recent news, Nerdy Inc. reported its Q4 2024 earnings, revealing a 13% decline in revenue year-over-year, totaling $48 million. Despite surpassing revenue forecasts of $44.94 million, the market reacted negatively, potentially due to ongoing challenges with profitability and a decrease in consumer learning membership revenue. The company has been focusing on AI-powered innovations to enhance user experience, though these efforts have yet to translate into profitability. For 2025, Nerdy projects revenue between $190 million and $200 million, with an adjusted EBITDA guidance ranging from -$8 million to -$18 million, aiming for EBITDA and cash flow positivity by Q4 2025. The company also introduced several AI tools, including Tutor Copilot, designed to improve the learning experience by providing personalized, high-quality sessions. Analysts have shown interest in how these AI tools will impact retention and operational efficiency, with expectations of improvements in gross margins. Additionally, the company highlighted its efforts to streamline operations and reduce costs, including a reduction in corporate headcount by approximately 15% due to AI-enabled productivity initiatives.
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