Udemy Analysts Flag SMB Softness And Sales Cycle Elongation Leading To Enterprise Growth Moderation

Needham analyst Ryan MacDonald maintained Udemy Inc UDMY with a Buy and lowered the price target from $17 to $16.
Despite FX headwinds that drove a 4-point reduction to the growth rate, Udemy reported an in-line quarter, with total revenues growing 19.8% Y/Y.
Revenue continues to shift towards Udemy Business, but deal elongation that has expanded to the Enterprise segment is causing near-term growth headwinds.
The Consumer segment was resilient, with the segment expected to return to growth in 2H23.
Udemy's initial FY23 revenue outlook came below street expectations as UB continues to see weakness in SMB and long sales cycles in the Enterprise. At the same time, the Consumer segment faces stronger-than-expected FX headwinds.
Despite the disappointment in the topline outlook, the analyst highlighted Udemy is operating on a budget in FY23, accelerating its path to adjusted EBITDA breakeven, with the company expected to reach the target in 2H23 vs. prior expectations of FY24.
When combining this with the analyst's view that the topline outlook is conservative based on the strength of the UB pipeline, the analyst chooses to stick with the top ed-tech pick for 2023.
KeyBanc analyst Jason Celino maintained an Overweight and lowered the price target from $19 to $15.
The analyst flagged FX and macro headwinds in the form of SMB softness and sales cycle elongation driving more moderated Enterprise growth.
While Celino cut the price target, he was encouraged by Udemy's growth opportunities within Enterprise and increasing focus on profitability.
Price Action: UDMY shares traded lower by 5.63% at $11.89 on the last check Wednesday.

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