Coursera (NYSE:COUR) Surprises With Q3 Sales But Stock Drops 13.4%
Online learning platform Coursera (NYSE:COUR) beat Wall Street’s revenue expectations in Q3 CY2024, with sales up 6.4% year on year to $176.1 million. On the other hand, next quarter’s revenue guidance of $176 million was less impressive, coming in 5.7% below analysts’ estimates. Its GAAP loss of $0.09 per share was also 44.9% above analysts’ consensus estimates.
Is now the time to buy Coursera? Find out by accessing our full research report, it’s free.
Coursera (COUR) Q3 CY2024 Highlights:
- Revenue: $176.1 million vs analyst estimates of $174 million (1.2% beat)
- EPS: -$0.09 vs analyst estimates of -$0.16 (44.9% beat)
- EBITDA: $13.34 million vs analyst estimates of $2.62 million (409% beat)
- Revenue Guidance for Q4 CY2024 is $176 million at the midpoint, below analyst estimates of $186.6 million
- EBITDA guidance for the full year is $37.5 million at the midpoint, above analyst estimates of $26.54 million
- Gross Margin (GAAP): 54.7%, up from 50.3% in the same quarter last year
- EBITDA Margin: 7.6%, up from -3.2% in the same quarter last year
- Free Cash Flow Margin: 9.5%, similar to the previous quarter
- Paying Users : 162 million, up 26.03 million year on year
- Market Capitalization: $1.18 billion
“In the third quarter, we demonstrated strong progress across Coursera's learning ecosystem. We welcomed ten new partners and launched more than a dozen industry micro-credentials, many of which teach emerging skills in generative AI,” said Coursera CEO Jeff Maggioncalda.
Company Overview
Founded by two Stanford University computer science professors, Coursera (NYSE:COUR) is an online learning platform that offers courses, specializations, and degrees from top universities and organizations around the world.
Consumer Subscription
Consumers today expect goods and services to be hyper-personalized and on demand. Whether it be what music they listen to, what movie they watch, or even finding a date, online consumer businesses are expected to delight their customers with simple user interfaces that magically fulfill demand. Subscription models have further increased usage and stickiness of many online consumer services.
Sales Growth
Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Thankfully, Coursera’s 21.3% annualized revenue growth over the last three years was impressive. This shows it expanded quickly, a useful starting point for our analysis.
This quarter, Coursera reported year-on-year revenue growth of 6.4%, and its $176.1 million of revenue exceeded Wall Street’s estimates by 1.2%. Management is currently guiding for a 4.2% year-on-year increase next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 12% over the next 12 months, a deceleration versus the last three years. Still, this projection is above-average for the sector and illustrates the market believes sees some success for its newer products and services.
Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefitting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.
Users
User Growth
As a subscription-based app, Coursera generates revenue growth by expanding both its subscriber base and the amount each subscriber spends over time.
Over the last two years, Coursera’s users, a key performance metric for the company, increased by 20.5% annually to 162 million in the latest quarter. This growth rate is among the fastest of any consumer internet business and indicates its platform's popularity is exploding.
In Q3, Coursera added 26.03 million users, leading to 19.1% year-on-year growth. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t accelerating user growth just yet.
Revenue Per User
Average revenue per user (ARPU) is a critical metric to track for consumer internet businesses like Coursera because it measures how much the average user spends. ARPU is also a key indicator of how valuable its users are (and can be over time).
Coursera’s ARPU fell over the last two years, averaging 2.3% annual declines. The decreasing monetization of its platform partly explains why it saw a big increase in users. If Coursera starts extracting more value from its ecosystem, it’s unclear whether user growth would be sustainable.
This quarter, Coursera’s ARPU clocked in at $1.09. It declined 10.7% year on year, worse than the change in its users.
Key Takeaways from Coursera’s Q3 Results
We were impressed by how significantly Coursera blew past analysts’ EBITDA expectations this quarter. On the other hand, its full-year revenue guidance missed Wall Street’s estimates, sending shares lower. Overall, this quarter could have been better. The stock traded down 13.4% to $6.60 immediately after reporting.
So do we think Coursera is an attractive buy at the current price?If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
