An RBC Capital Markets analyst is out bullish on shares of Coursera, Inc (NYSE:COUR), citing strengths in its multi-segment business model, irreversible tailwinds from the COVID-19 pandemic and rapid growth opportunities for margin expansion.
The Coursera Analyst: Rishi Jaluria initiated coverage of Coursera with an Outperform rating and $50 price target.
The Coursera Takeaways: Coursera’s multi-segment approach of consumer, enterprise and higher education has enabled the digital education platform to benefit from a “powerful flywheel effect and a sustainable economic moat,” Jaluria said in a Thursday initiation note.
Each segment helps to promote other parts of the business, the analyst said. For example, Jaluria said the consumer side helps to spread awareness for the enterprise business and serves as a funnel for Coursera’s degree program, which helps lower the company’s customer acquisition costs.
The pandemic has also shifted the education industry and has opened the door to many more online programs, Jaluria said.
The analyst sees room for more growth in the digital education space, stating that he believes more degrees will be available in a fully online format.
In addition, less developed markets such as India provide Coursera with a vastly untapped market for online education, he said.
Coursera is growing rapidly with room for margin expansion, in RBC’s view.
From 2017-2020, Coursera’s revenue has grown at a CAGR of 45%, and it was the seventh fastest-growing software company in 2020, Jalura said.
The company’s overall margins in 2020 were 53%. Jaluria expects the company to see SaaS-like margins in the range of 70%-plus in the future but notes that for this to happen, Coursera’s revenue needs to become less reliant on its consumer business and its enterprise margins need to grow.
COUR Price Action: Coursera shares were up 5.37% Friday at $46.52.