Coursera shares drop 14% in wake of earnings miss, Cantor downgrade
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Coursera (NYSE:COUR) shares tumbled almost 14% Friday as investment firm Cantor Fitzgerald downgraded the online learning company after it reported a fourth-quarter earnings miss and weak guidance.
Analyst Brett Knoblauch lowered his rating to neutral from overweight, and trimmed his price target to $16 a share from $17, noting that the risk-reward has become "less attractive" at current levels, with the stock up more than 20% year-to-date.
Knoblauch said that with Coursera's (COUR) growth expected to slow in 2023, it was concerning that the company didn't give a stronger outlook for its expected margins this year.
Knoblauch also added that such factors are likely due Coursera's (COUR) largest industry partner--widely believed to be Google (GOOG) (GOOGL)--signing a multi-year deal with the company, but on less favorable terms for Coursera (COUR).
In addition, Coursera (COUR) is going to spend an additional $25M to support the contract transition, which hurts gross margins by roughly 1,000 basis points that it has generated since 2020, Knoblauch pointed out. With the belief that Google (GOOG) (GOOGL) will not be the last partner to re-work the contract, Coursera (COUR) could see growth slow quicker than expected, he added.
On the plus side, Knoblauch noted that generative artificial intelligence could be a "tailwind" for the company, as Coursera's (COUR) management talked about it in a positive light.
"While use case development of generative AI is still in its infancy, we do see a scenario where Coursera can work with industry partners to create content on generative AI, which we expect to be a high-demand offering," Knoblauch added.
Analysts are largely positive on Coursera (COUR). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates COUR a HOLD.