Udemy (UDMY) drew investor attention after reporting third-quarter earnings that topped profit and revenue expectations. However, total sales remained unchanged year over year and management offered a cautious revenue outlook for the coming quarter.
See our latest analysis for Udemy.
After beating quarterly profit expectations and announcing a shift to a subscription-first model, Udemy’s share price dropped sharply, with a 1-week share price return of -16.4% and a year-to-date slide of nearly 31%. Market momentum is fading as cautious guidance and changing revenue mix temper earlier optimism. This is reflected in a 12-month total shareholder return of -29.2% and an even steeper three-year loss.
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With shares trading at a steep discount to analyst price targets and management projecting mixed signals ahead, is Udemy an overlooked bargain in the making, or is the market already bracing for slow growth?
Udemy’s narrative-driven fair value estimate lands at $10.17, which is significantly above the latest close price of $5.70. This valuation hinges on future earnings growth and profitability projections that diverge from the current market stance.
The shift towards a subscription-based revenue model, now comprising around 70% of overall revenue, provides greater earnings predictability, higher gross margins, and improved bottom-line performance as Udemy Business (B2B) wins larger deals and consumer subscription GMV grows more than 40% year over year. This indicates robust future margin expansion and more stable recurring cash flows.
Read the complete narrative.
Want to know what surprising numbers back this bold valuation? The fair value calculation leans on a set of forecasts that project a fast-changing earnings landscape and an ambitious profit trajectory. Curious which assumptions drive this upside? Read the full narrative for all the details lurking beneath the headline.
Result: Fair Value of $10.17 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, ongoing declines in consumer revenue and heavy reliance on a few large enterprise clients could limit Udemy’s growth and earnings stability in the future.
Find out about the key risks to this Udemy narrative.
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