Coursera’s stock price has taken a beating over the past six months, shedding 49.5% of its value and falling to $5.96 per share. This may have investors wondering how to approach the situation.
Is now the time to buy Coursera, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Coursera Not Exciting?
Despite the more favorable entry price, we don't have much confidence in Coursera. Here are three reasons you should be careful with COUR and a stock we'd rather own.
1. Customer Spending Decreases, Engagement Falling?
Average revenue per customer (ARPC) is a critical metric to track because it measures how much the average customer spends. ARPC is also a key indicator of how valuable its customers are (and can be over time).
Coursera’s ARPC fell over the last two years, averaging 8.1% annual declines. This raises questions about its ability to engage users and signals its platform’s value is eroding.
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Coursera’s revenue to rise by 7.3%. This projection doesn't excite us and indicates its products and services will see some demand headwinds.
3. Poor Marketing Efficiency Drains Profits
Unlike enterprise software that’s typically sold by dedicated sales teams, consumer internet businesses like Coursera grow from a combination of product virality, paid advertisement, and incentives.
It’s very expensive for Coursera to acquire new users as the company has spent 61.7% of its gross profit on sales and marketing expenses over the last year. This inefficiency indicates a highly competitive environment with little differentiation between Coursera and its peers.
Final Judgment
Coursera isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 2.6× forward EV/EBITDA (or $5.96 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're fairly confident there are better stocks to buy right now. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
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