Coursera (NYSE: COUR) went public at the end of March through an IPO. It had a strong market debut, with its share price finishing its opening day up 36%. This gave the online learning company an initial $5.6 billion market cap.
Following some ups and downs during the intervening weeks and months, Coursera's stock price is now back close to its opening day levels. This article will ask the question, is Coursera stock a good buy?
The bull case for Coursera
During the COVID-19 pandemic, online learning platforms such as Coursera saw strong demand as in-person learning was put on pause. More than 3,700 universities and colleges across the world now utilize Coursera. While it already has 150+ notable universities offering over 4,000 courses on this platform, there is a huge scope for growing this offering in both the U.S. and overseas.
Another highlight for Coursera during the pandemic was being able to partner up with more than 330 government agencies in 30 U.S. states and 70 countries. This was through the Coursera Workforce Recovery Initiative, giving people free access to notable courses.
While the vaccination rollout is continuing across the world, it is unclear if students will be willing to go back to in-person learning in the future. The benefits of learning remotely are obvious and if this trend persists, Coursera could be well-positioned to take advantage.
The quantifiable growth figures for Coursera are also impressive. The company's revenue rose last year 59% to $293.5 million. Its user growth also impressed, with 81.5 million people using the platform by the end of 2020, a 56% year-on-year rise.
The strong performance continued into Q1 2021, with major investors like George Soros getting on board. As a market, the worldwide e-learning sector has a lot of potential room for expansion. It is predicted to go from being worth $101 billion in 2019 up to over $370 billion by 2026.
Coursera currently has three main sources of revenue - individual consumers, its degree program, and enterprise customers. While individual consumers are the main source of revenue, the degree program is the most profitable. It also has a reasonably healthy balance sheet, despite its losses.
The bear case for Coursera
Coursera is another tech company that holds a lot of promise but is still not profitable. While it is experiencing strong levels of growth, there are concerns that these rates will significantly slow down as the world starts to get back to normal. The return to in-person learning will play a key role. Investors will be waiting to see if in-person learning returns to pre-pandemic levels or if the dynamic has changed forever.
Coursera CFO Ken Hahn has already said that the results from upcoming quarters will likely not be as impressive as a year ago. The current estimated revenue growth is 26% for 2021, down from 59% in 2020.
Another issue will be retaining its current customers. As time goes on, the interest could wane as in-person learning returns and people look at other options in the highly competitive space. Some of the other big players in the online learning sector these days include Grand Canyon Education (NASDAQ: LOPE), Chegg (NYSE: CHGG), New Oriental Education and Technology (NYSE: EDU), as well as 2U (NASDAQ: TWOU).
The consumer segment is the main driver of revenue at the moment for Coursera. If things start to decline in this area, then it would signal warning bells for investors. While it has a number of revenue streams, it will take a lot of hard work to get the other two segments to make up for a big drop in the individual consumer department.
So, should I buy Coursera stock?
Coursera certainly holds a lot of potential. If it manages to retain the strong user base it built up over the course of the pandemic, then investors will see a lot to like about Coursera. Potential investors will be watching the company's Q2 results with keen interest.
If decent revenue growth has been maintained, Coursera is likely to get a lot of love. Therefore, if you are optimistic about Coursera's chances in the long run, now could be the time to buy.
Quickfire round:
Who is the CEO of Coursera?
Jeff Maggioncalda is the current CEO of Coursera.
Is Coursera profitable?
No, Coursera reported a net loss of $66.8 million in 2020.
Does Coursera pay dividends?
Coursera does not currently pay dividends.
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