Shares of online education company Coursera (NYSE: COUR) crashed on Tuesday and even briefly hit all-time lows in the first moments of trading today. Coursera stock has recovered a little from the bottom, but was still down about 12% as of noon ET.
Coursera just reported financial results for the first quarter of 2024, and in isolation, the numbers weren’t bad. In Q1, the company generated revenue of $169 million, up 15% year over year. Its gross margin improved to 53% compared to 52% in the prior-year period. And it quintupled its cash from operations to $24.5 million.
Analysts were nevertheless discouraged because the numbers for Coursera aren’t as good as expected. For starters, the company’s Q1 revenue was at the low end of its guidance. And for 2024, management just lowered revenue expectations to $705 million, at best, compared with previous guidance of $730 million, at worst.
Both management and the analyst community had expected courses for artificial intelligence (AI) to drive strong results for Coursera in 2024. However, by lowering guidance, it seems the boost isn’t as advertised.
It’s admittedly hard to know what to do with Coursera stock right now. On one hand, Q1 had some good numbers, so the drop seems like an overreaction. On the other hand, the company’s new lower full-year revenue guidance implies just 10% year-over-year growth. Trading at about 2.5 times its trailing sales right now, Coursera stock seems reasonably valued, not necessarily a great deal.
Online education is a tough business, and AI education isn’t delivering as expected. Coursera has some strong partnerships and some promise. But investors might be better off taking the wait-and-see approach when it comes to believing the company can stimulate a better growth rate.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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