Coursera's Slowdown In Growth Likely Remains Near-Term Overhang, Analyst Says

Open online course provider Coursera Inc COUR reported first-quarter FY24 quarterly sales of $169.1 million, which missed the analyst consensus estimate of $170.433 million. The quarterly earnings of 7 cents per share beat the analyst estimate.

Following are the reactions of analysts after the first-quarter FY24 earnings.

Goldman Sachs – Reiterates Sell, lowers price target from $15 to $10.50.

According to analyst Eric Sheridan, revenue disappointed based on elements of lower user funnel conversion, delayed content launches, and a continued weaker enterprise environment.

Net revenue retention dropped from 98% to 94% Q/Q as the overall enterprise environment remained challenged, noted the analyst.

In the near-term, the analyst expects investor debates to remain focused on any recovery in the demand environment across all segments.

In the longer term, there are still open-ended questions around the timing and magnitude of how enterprises will integrate generative AI into their ecosystems and the role Coursera's platform will play within this context, noted the analyst.

Cantor Fitzgerald – Reiterates Overweight, lowers price target from $26 to $21

For the first time in the last seven quarters, Coursera delivered revenue below the midpoint of its previously given guidance range, analyst Brett Knoblauch noted.

Despite Coursera adding 7 million new registered learners, its consumer segment was the biggest underperformer, driven by lower spend, noted the analyst.

The analyst added that the management said the weakness was primarily due to North American paid learners, who have meaningfully higher economics than international paid learners.

The guidance of $164 million in 2Q24 revenue and revised $700 million (midpoint) revenue forecast in FY24 was the biggest guidance revision the company has made in its history since it went public in 2021, said the analyst.

Out of the Degrees, Consumer and Enterprise segments, the analyst argued that two are poised to have a better macro backdrop over the coming quarters/years, but noted Coursera’s consumer segment is the most meaningful and will have an outsized impact on total revenue growth. 

Coursera has enough cash on hand to repurchase ~42% of the company, and at current valuations, the analyst said it would be a missed opportunity if it did not.

Overall, the analyst sees Coursera as the most important education platform across the globe and which is making the right investments that should drive more meaningful growth in the future.

Coursera stock lost more than 13% in the last 12 months. Investors can gain exposure to the stock via Neuberger Berman Next Generation Connected Consumer ETF NBCC and Vanguard Total Stock Market Index Fund ETF VTI

Price Action: COUR shears are trading lower by 13.9% at $10.24 at the last check Tuesday.

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