On Thursday, Canaccord Genuity maintained a Buy rating on Udemy Inc (NASDAQ:UDMY) with a steady price target of $12.00. Following investor meetings with Udemy's CEO Greg Brown and CFO Sarah Blanchard, the firm reiterated its stance on the online learning platform. According to InvestingPro data, analyst targets for Udemy range from $7.50 to $20.00, with the stock currently trading at $8.38.
The management team discussed Udemy's evolving Enterprise go-to-market strategy and the foundational elements expected to drive margin growth. They highlighted the rapid technological changes in job skills, such as those brought on by Generation Artificial Intelligence (GenAI), and how companies are increasingly adopting a skills-based approach to hiring and professional development. The company maintains impressive gross profit margins of 61.14%, as reported by InvestingPro.
The firm acknowledged that Fiscal Year 2025 is anticipated to be a transitional period for Udemy, as the company faces growth headwinds due to the strategic shift of sales resources and persistent softness in the EMEA region. Despite these challenges, Canaccord Genuity believes these factors are already reflected in the stock's price. While not currently profitable, InvestingPro analysis shows 9 analysts have revised their earnings upwards, expecting profitability this year.
Canaccord Genuity finds the valuation of Udemy shares appealing, citing the secular tailwinds that are driving demand for personalized online learning solutions. The firm also noted the robust forecast for EBITDA growth over the next three years, suggesting a positive outlook for the company's financial performance. InvestingPro analysis indicates the company holds more cash than debt on its balance sheet, supporting its financial stability during this growth phase.
In other recent news, online learning platform Udemy has reported substantial growth, with a 6% year-over-year revenue increase to $195 million in the third quarter of 2024, surpassing its own financial expectations. This growth is primarily attributed to the company's strategic focus on large enterprise customers, which now account for approximately 75% of revenue. Additionally, Udemy's annual recurring revenue (ARR) experienced a 14% growth, exceeding $500 million.
In line with these developments, Udemy has made strategic appointments to its board. Marylou Maco, Avaya's Chief Revenue and Customer Experience Officer, and Debra Chrapaty, Chief Technology Officer at Toast (NYSE:TOST), have joined the board, bringing a wealth of experience from the technology sector. These appointments come at a time when Udemy is focusing on expanding its market presence and leveraging emerging technologies such as generative AI to address the increasing skills gap in the workforce.
Despite a decline in consumer revenue, Udemy maintains an optimistic outlook for the future, raising its full-year 2024 revenue outlook to $780-$783 million. Furthermore, Udemy's founder, Eren Bali, has rejoined as CTO, focusing on product strategy and operational efficiency, which are expected to further drive product innovation and efficiency. Analysts maintain a positive outlook, with consensus forecasts predicting profitability this year.
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