After debuting at the end of March, so far Coursera (NYSE:COUR) stock hasn’t exactly been a favorite among investors. Sure, initially shares in the “future of remote learning” play saw a boost in its first week of trading after its IPO. Priced at $33 per share, COUR stock rallied to as much as $62.53 in early April.
Since then, however, it’s been a long slide. First, it pulled back to just above the $40 per share price level. Then, after a partial rebound, it’s seen another major downward move since the start of May.
Yet, now that it’s just above its offering price, today’s prices (around $39 per share) may be a solid entry point for a long-term position. Why? Valuation may look rich, even after its 42%+ selloff from its highs. Sporting a market capitalization of $5.2 billion, the company sells at a high multiple to its trailing-12-month (TTM) sales.
But, I wouldn’t write this off based on near-term results. Like with any “growth story,” it’s future potential that’s the main factor. And, fortunately here, the long-term trends back continued above-average growth in the years to come. As learning becomes an increasingly remote experience, and career/skills training in particular stays in high demand, this company’s established platform is set to benefit.
In short, the best move here is clear: snap this up, as it remains depressed following its post-IPO sell-off.
Long-Term Trends Bode Well for COUR Stock
It’s taken less than a decade for Coursera to become a leading name in the remote learning space. And, things haven’t been slowing down in recent years. As seen from its S-1 prospectus filing, revenues more than tripled between 2017 and 2020, rising from $95.6 million, to $293.5 million. Sales growth alone last year was nearly 60%.
But, don’t write this off as a situation where growth headed to a screeching halt, with insiders cashing out while the going’s still good. Yes, we will likely not see growth numbers this year and the next on par with 2020’s blockbuster results. Like with other tech-related plays, the pandemic gave its growth an extra boost, as education pivoted to a remote-only model.
Per analyst projections, sales are expected to climb around 29.1% in 2021 and 25.6% in 2022. This is on par with the company’s sales growth between 2018 and 2019. And, it may be a level of growth that can carry on for years to come. How so? Putting it simply, Coursera’s business model is on the right side of trends.
As the analyst community has pointed out, in their largely bullish takes on COUR stock, the company’s focus on the career skills segment of education may be its key to long-term success. Demand for workforce retraining is ample due to automation and digitalization trends. This points to platforms like this one continuing to scale up.
With this, today’s valuation is more than reasonable, leaving plenty of room for the stock to gain as the trends backing it keep on playing out.
Don’t Let Today’s Valuation Make You Dismiss An Opportunity
Like I mentioned above, even after its pullback, Coursera shares trade at a premium valuation. But, as is the case with fast-growing companies, you can’t miss the forest for the trees. That is, you can’t dismiss an opportunity, just because, based on current results, it looks too richly priced.
With the digitalization megatrend, it’s clear this company has plenty of growth runway ahead of it. That means things still remain in the early stages, with substantial growth ahead in the coming years, if not the next decade. Not only that, as it scales up, Coursera will become a highly profitable business.
Investing heavily in its growth, the company is still operating in the red. Even now, the company is set to have net losses per share of 54 cents this year and 40 cents in 2022. But, with the sharp increase in sales over the past few years, said losses have narrowed.
Once it’s able to take its foot off the gas, operating margins will be substantial. It’s going to take some time. But, for those with a long time horizon, buying, holding and waiting may just well pay off.
The Bottom Line
A few months back, it didn’t take much for markets to bid up a growth stock. But now, investors are looking at early-stage companies more critically. And rightfully so. Scores of companies have gone public, whether via the traditional initial public offering (IPO) route, or via SPAC (special purpose acquisition company) mergers.
Many of the names that have recently gone public may fail to live up to their projections. Yet, that’s not the story here with COUR stock. A bona fide “growth story,” with long-term trends backing it up, today’s investor skittishness gives you the opportunity to scoop this up at a fantastic long-term entry point.
On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in the article.
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