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Investing.com -- Morgan Stanley has shifted its ratings on two online education platforms, downgrading Coursera to Equal-weight from Overweight and upgrading Udemy to Equal-weight from Underweight.
The adjustments come amid changes in relative valuations and muted confidence in further upside for Coursera’s premium.
“COUR now trades at a ~43% premium EV/CY26 GP,” Morgan Stanley (NYSE:MS) wrote, noting a reversal from its earlier position when Coursera traded at a 10% discount to Udemy.
“We lack confidence [that this] valuation gap would meaningfully increase,” the firm added.
While Coursera has outperformed over the past 3 and 12 months and Udemy has underperformed over the same periods, Morgan Stanley believes “absolute stock moves and relative valuation changes no longer support a risk/reward attractive enough for a Coursera Overweight call.”
Despite the downgrade, Morgan Stanley continues to prefer Coursera within the education software space, citing its “more favorable Bull / Bear skew.”
However, analysts noted that “challenges [are] well factored into estimates and stocks,” including “decelerating Enterprise/Corporate trends” and “negative YoY third party web traffic growth.”
The firm raised its price target on Coursera to $11 from $10 and on Udemy to $9 from $7. These targets imply ~1.7x sales and ~13.5x free cash flow (FCF) for Coursera, and ~1.5x sales and ~12.5x FCF for Udemy.
Morgan Stanley said this represents a “warranted relative valuation difference due to higher growth at COUR.”