Online educational provider Coursera (COUR) has seen its shares surge 27% in the last five days following surprisingly strong Q2 results that beat top-and-bottom-line expectations. After Q1’s disappointing results, I wrote, “Investors may want to wait on the sideline until the smoke clears and the stock has more positive market sentiment and momentum.” The smoke has been cleared, and momentum has shifted after a few challenging years.
With the company’s generative AI catalog crossing two million enrollments, sparking revenue growth, the haze hanging over the stock has disappeared, suggesting investors may want to revisit this opportunity.
Coursera’s Expanding AI Footprint
Coursera is a leading global online learning platform that has joined forces with over 325 university and industry partners to offer a wide range of learning content and credentials for its 155 million registered learners.
Advancements in the Coursera platform itself include the launch of a suite of generative AI-powered academic integrity features, the general availability of Coursera Coach, its interactive, AI-powered guide, and the expansion of its GenAI Academy with GenAI for Teams – a new catalog of skills training and credentials for various business functions.
The platform recently launched a record number of entry-level Professional Certificates in partnership with industry giants like Google Cloud (GOOGL), IBM (IBM), Meta (META), and Microsoft (MSFT). These certificates equip learners with job-relevant generative AI content to keep pace with the changing labor market and emerging skill needs.
In the enterprise sector, Coursera has strategically partnered with Dow Inc. (DOW) to roll out AI and leadership training, with an impressive 80% engagement of its IT workforce. Coursera for Government has also announced a partnership with Qatar’s Education Above All Foundation, aiming to provide learning programs for thousands of Afghan women and girls. In addition, Coursera for Campus is enabling higher education institutions across the Asia Pacific region to offer online learning for academic credit.
Finally, the company has announced that a master’s degree program in computer science is now available from Clemson University. This program features performance-based admissions, an AI-focused curriculum, and affordable tuition.
Coursera’s Recent Financial Results & Outlook
The company reported stronger than anticipated results for Q2 2024. Revenue of $170.34 million surpassed analysts’ expectations of $164.41 million and marked an 11% year-over-year increase. Gross profit also improved, increasing from $79.7 million to $90.2 million. The net loss of $23 million improved from last year’s $31.7 million. Non-GAAP net income was recorded at $13.8 million, a significant rise compared to a net loss of $0.3 million last year. Also, earnings per share (EPS) of $0.09 exceeded consensus estimates of $0.01.
Management has issued guidance for Q3 and FY 2024. In the third quarter, revenue is projected to be between $171 and $175 million, with an adjusted EBITDA of $0 to $4 million. Revenue is expected to range from $695 to $705 million for the year. The adjusted EBITDA for the year is projected to be between $24 and $28 million, which reaffirms the previous adjusted EBITDA margin outlook of approximately 4%.
What Is the Price Target for COUR Stock?
The shares have been on an extended slide over the past few years, with the recent post-earnings jump dramatically shifting their direction. The stock trades at the lower end of its 52-week price range of $6.35 – $21.26 and shows positive price momentum by trading above the 20-day (7.58) and 50-day (8.05) moving averages. With the P/S ratio of 2.12x, the shares look to be fully valued compared to the Education & Training Services industry average of 1.37x.
Analysts following the company have been bullish on the stock. For instance, Cantor Fitzgerald analyst Brett Knoblauch recently raised the price target on the shares from $21 to $22 while maintaining an Overweight rating, noting Q2’s top-and-bottom-line beats demonstrating increased demand for AI-related content and the company’s long-term potential to disruption the education system.
Coursera is rated a Strong Buy overall, based on ten analysts’ recommendations and price targets. The average price target for COUR stock is $17.00, representing a 74.54% potential upside from current levels.
Coursera in Conclusion
In the wake of impressive Q2 results, Coursera’s shares have seen a substantial surge. The global learning platform has made notable strides with the launch of AI-powered courses. These developments have led to notable revenue growth and positive market sentiment, making it an attractive opportunity for investors interested in the education industry.
