On Friday, Goldman Sachs (NYSE:GS) adjusted its outlook on Coursera Inc (NYSE: NYSE:COUR), reducing the 12-month price target to $7.25 from the previous $9.00 while sustaining a Sell rating on the shares. The adjustment comes after Coursera's third-quarter earnings report for 2024, which highlighted several key points from management's perspective.
Management noted that Q3 revenue slightly surpassed the high end of its prior guidance, driven by strong performance across its three revenue segments. The quarter also showed continued positive trends in gross profit and adjusted EBITDA margin, both of which exceeded Goldman Sachs and broader market expectations as well as the company's guidance ranges.
Despite these positive indicators, Goldman Sachs pointed to a downward adjustment in Coursera's fourth-quarter guidance relative to the full year. The company cited challenges in the Consumer and Enterprise segments as the reason for the tempered outlook. This revised guidance has influenced Goldman Sachs' decision to reaffirm the Sell rating on Coursera's shares.
The firm's stance on Coursera is now more based on a relative risk/reward comparison within its broader coverage universe, rather than an absolute downside from current levels. This reiteration of the Sell rating, along with the lowered price target, reflects Goldman Sachs' updated operating estimates following the earnings report and forward-looking management commentary.
In other recent news, Coursera Inc. has reported a year-over-year revenue increase of 11% in its second quarter, reaching $170.3 million. This growth was primarily driven by robust enrollment numbers and an increase in international learners.
BofA Securities has initiated coverage on Coursera shares with a Buy rating, recognizing the company's potential for long-term growth and strategic shift towards proprietary content.
Cantor Fitzgerald, however, raised its shares target for Coursera from $21.00 to $22.00, maintaining an Overweight rating influenced by Coursera's exceeding expectations for both revenue and earnings. Needham also maintained a Buy rating on Coursera, following the company's better-than-expected Q2 results.
Coursera's recent developments include the launch of a record 16 new professional certificate programs and advancements in its generative AI offerings, with over two million enrollments in its AI catalog. The company expects Q3 revenue to range between $171 million and $175 million and plans to continue expanding its Degree and Enterprise segments.
InvestingPro Insights
Recent InvestingPro data provides additional context to Coursera's financial situation and market performance. Despite Goldman Sachs' bearish outlook, Coursera's revenue growth remains positive, with a 16.19% increase in the last twelve months as of Q2 2024. The company's gross profit margin stands at a healthy 52.3%, indicating efficient cost management in its core operations.
However, Coursera's profitability remains a concern, aligning with Goldman Sachs' cautious stance. The company's operating income margin is -18.13%, reflecting ongoing challenges in achieving profitability. This is further emphasized by two key InvestingPro Tips: Coursera has not been profitable over the last twelve months, and its stock price has fallen significantly over the last year.
On a more positive note, InvestingPro Tips reveal that Coursera holds more cash than debt on its balance sheet and its liquid assets exceed short-term obligations. These factors suggest financial stability despite current profitability issues. Additionally, analysts predict the company will be profitable this year, which could potentially impact future valuations.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Coursera, providing a deeper understanding of the company's financial health and market position.
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