As a leading provider of online education, Coursera Inc (COUR) is positioned to capitalize on the critical role its services will play in modern job markets. It is crucial because employees want to earn more and know that they can only achieve better than average working conditions with a high level of education.
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But given the high probability that the current turmoil will continue to put downward pressure on shares, my stance is to hold the stock, for now.
On TipRanks, COUR scores a 5 out of 10 on the Smart Score spectrum. This indicates a potential for the stock to perform in-line with the broader market.
About Coursera
Founded in 2012 by two Stanford computer science professors, Coursera is a prominent provider of online learning.
As of March 31, 2022, Coursera has 102 million registered students and partners with more than 250 leading universities and other public and private entities. The partnership allows the company to offer courses, specializations, professional certifications and various bachelor’s and master’s degrees.
Currently, several institutions around the world use Coursera to educate and retrain their citizens, employees and students in areas such as data science, technology and business.
Falling Stock Prices
Elevated inflation, which the U.S. Federal Reserve is trying to contain, could prompt households to cut spending, even on some essential goods and services.
Whether or not they manage to push inflation below the 2% target, the matter has created such headwinds for online educators, that shares of Coursera have fallen more than 35% so far this year.
Financial Results from the First Quarter of 2022
In the first quarter of 2022, Coursera’s press release reported a GAAP net loss of -$0.27, but it beat analysts’ median estimate by $0.01.
Revenue came in at $120.4 million, up nearly 36% year-over-year and better than analysts’ average forecast of $114.5 million.
The company is looking for a better solution because the performance can translate into positive income. Backed by promising industry prospects, the company aims to move to profitability through a growth strategy based on expanding its content and reference offerings.
The company appears to be on the right track as the online platform continues to add training for students and those seeking relevant skills for jobs, as well as partnerships with higher education institutions around the world and leading brands. The latter include Coca-Cola (KO) in Turkey, Hertz (HTZ) in the U.S. and Toyota Motor (TM) North America R&D in the US.
The Global Need for Higher Education
In times of social tensions caused by the question of low wages versus higher living costs, the young and adult population should by now be aware that the higher the level of education or specialized knowledge, the greater the chance of finding a job with better wages and benefits.
We have received multiple pieces of evidence supporting the relationship around the world during the recovery from the COVID-19 crisis. Indeed, despite an acute attempt to capitalize on employers’ need to hire staff to respond to rapidly growing demand, applicants with significantly above-average education and skills have developed greater bargaining power. We can all remember that.
Not that the situation is any different now, but during the recovery from the pandemic, we had a very strong reaffirmation of the higher education/higher salary ratio.
Company Guidelines on Revenue and Adjusted EBITDA
The earnings announcement is likely to be delayed again, as Coursera targets a negative adjusted EBITDA of -$45.5 million to -$51.5 million on revenue of $538 million to $546 million, for the full year 2022.
Wall Street’s Take
In the past three months, ten Wall Street analysts have issued a 12-month price target for COUR. The stock has a Strong Buy consensus rating based on ten unanimous Buys.
The average Coursera price target is $30.22, implying an 92.24% upside potential.
Valuation
Shares are changing hands at $15.72 as of the writing of this article for a market cap of $2.31 billion, a price-earnings ratio of -13.4 and a price-sales ratio of 4.75.
The stock is currently trading more than 15% above the lower limit and 2.7 times below the higher limit of the 52-Week Range $13.36 – $44.39.
These stock prices are also more attractive compared to the 50-day moving average price of $17.49, and the 200-day moving average price of $24.27.
From a comparison between the current share prices and a few technical indicators as described above, the stock doesn’t look expensive at all.
The stock has a 14-day Relative Strength Indicator (RSI) of 48.18, indicating that the stock price is far from oversold despite its significant decline. The indicator ranges between 20 and 80. A reading of 20 or close means the stock is oversold or almost oversold. However, if the reading is close to 80 or just 80, the stock has approached the overbought level or is practically overbought.
The value that the 14-day RSI assigns to Coursera means that the stock’s share price can still see further downside moves, and indeed there are reasons to believe that these could unfold in the coming weeks.
Conclusion
The stock looking to grow seems on track to center the target.
The stock has fallen significantly so far this year. The ongoing strong headwinds should continue to push the stock price lower.
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