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On Thursday, Morgan Stanley (NYSE:MS) analysts upgraded Udemy Inc (NASDAQ: NASDAQ:UDMY) stock from Underweight to Equalweight. They also raised the price target to $9.00 from $7.00. The adjustment comes as analysts reassess Udemy’s financial performance and future prospects. Currently trading at $7.69, InvestingPro analysis suggests the stock is undervalued, with 8 analysts recently revising their earnings expectations upward.
The analysts noted that their previous Underweight rating was based on concerns about Udemy’s strategic shift and weakening demand. They believed that the company’s profitability targets were overly reliant on operating leverage, which conflicted with lower top-line growth. While revenue growth stands at 5.43%, the company maintains impressive gross profit margins of 63.39%. Additionally, they had concerns about high consensus estimates and negative third-party data.
Despite these concerns, the analysts acknowledged they underestimated Udemy’s ability to achieve EBITDA growth even with lower top-line figures. They now expect Udemy to maintain single-digit revenue growth but anticipate a stronger EBITDA growth rate. Analysts foresee the company potentially reaching 20% EBITDA margins in the coming years.
The revised outlook reflects a more optimistic view of Udemy’s financial health and growth potential. Analysts believe that the company’s shares are now better positioned, with limited downside risks.
In other recent news, Udemy Inc. announced its first-quarter results, which exceeded expectations in both revenue and profitability. Following this announcement, Canaccord Genuity adjusted its price target for Udemy, reducing it to $12 from $14, while maintaining a Buy rating. The company has secured a $200 million credit facility to support its growth initiatives, demonstrating strong financial health with no outstanding debt and substantial liquidity reserves. Udemy has also partnered with Indeed to enhance career advancement opportunities through skills-based hiring, offering a 30-day free access to its Personal Plan for users to develop in-demand skills.
Additionally, Udemy launched an AI-driven Role Play feature to improve soft skills through realistic conversation simulations, aiming to provide personalized learning experiences. Truist Securities reiterated a Hold rating on Udemy, maintaining a $7.00 price target, as the company continues to align with its strategic goals through partnerships and financial moves. The company has also provided a Q2 guidance that slightly exceeds market expectations, although it revised its revenue forecast for FY25 downwards due to macroeconomic uncertainties. Canaccord Genuity remains confident in Udemy’s strategic initiatives, which are focused on increasing client engagement and securing new contracts in a more favorable economic climate. These developments reflect Udemy’s ongoing efforts to enhance its market position and growth potential.
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