On Monday, JPMorgan initiated coverage on Coursera Inc (NYSE: NYSE:COUR) stock, an online learning platform, with a Neutral rating and a price target of $8.00. The firm highlighted Coursera's status as a leading provider in the online education sector, serving approximately 162 million registered learners, 1,600 paid enterprise customers, and 26,400 degree students.
The analyst from JPMorgan noted Coursera's operation of a three-sided marketplace that benefits from its expansive network of educator partners, comprehensive content, global reach, and continuous data and technological innovation. The platform's structure is seen as an advantage in leveraging the growing demand for reskilling and upskilling, particularly around General Artificial Intelligence (GenAI).
JPMorgan projects Coursera's revenue to grow at a compound annual growth rate (CAGR) of over 8% from 2023 to 2026. The firm also anticipates progress toward Coursera's long-term adjusted EBITDA margin goal of 15-20%, expecting a 9.2% adjusted EBITDA margin by 2026.
The analyst expressed a positive view on Coursera's global scale, its differentiated content and credentials, and the diversified nature of its revenue streams. The firm also recognized the potential for improving bottom-line performance.
Despite the positive aspects, Coursera faces growth headwinds, and JPMorgan is looking for signs of execution and improved revenue trends. The firm is also waiting for a more favorable macroeconomic environment and greater profitability, which could potentially drive Coursera's performance upwards in 2025.
In other recent news, Coursera, the prominent online learning platform, disclosed robust financial outcomes for Q3 2024, marking a 6% year-over-year rise in revenue to $176.1 million and an improvement in adjusted EBITDA margins to 5.4%. The company's strategic refocus on growth areas such as consumer credentials, business skilling, and campus partnerships is underscored by a 10% workforce reduction.
As part of its ongoing expansion, Coursera introduced over 500 generative AI courses and reported a 19% increase in paid enterprise customers. Despite a slowdown in consumer segment growth and softer retention rates, Coursera maintains a positive outlook, projecting Q4 revenue between $174 million and $178 million, and a full-year forecast of $690 million to $694 million.
The company also repurchased $40 million in stock and is exploring strategic acquisitions for double-digit growth. These recent developments reflect Coursera's commitment to adapt to the evolving educational landscape and align its offerings with market demands.
InvestingPro Insights
Adding to JPMorgan's analysis, recent data from InvestingPro provides further context on Coursera's financial position and market performance. Despite the company's revenue growth of 12.36% over the last twelve months, Coursera is currently not profitable, with a negative operating income margin of -15.25%. This aligns with JPMorgan's focus on the company's path to profitability.
InvestingPro Tips highlight that Coursera holds more cash than debt on its balance sheet, which could provide financial flexibility as the company works towards its long-term adjusted EBITDA margin goals. Additionally, analysts predict that Coursera will be profitable this year, supporting JPMorgan's projection of improving bottom-line performance.
It's worth noting that Coursera's stock price has fallen significantly over the last year, with a one-year price total return of -63.74%. This decline may reflect the growth headwinds and execution challenges mentioned in the JPMorgan analysis. However, with a market cap of $1.13 billion and a price-to-book ratio of 1.9, there might be potential for value creation if the company can successfully navigate its growth strategy.
Investors interested in a deeper analysis can find 9 additional InvestingPro Tips for Coursera, offering a more comprehensive view of the company's financial health and market position.
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