From a cursory glance, the implosion of educational technology (EdTech) stock Coursera (NYSE:COUR) following its IPO warrants considerable caution. However, the changing tides of the underlying economy may benefit COUR stock as a high-risk opportunity. Essentially, the labor market may incur a serious shock, forcing a much more competitive arena. As a company that offers courses, professional certificates, and the like, this dynamic may bolster Coursera’s relevance, which is why I am cautiously bullish on COUR as a speculative trade.
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To be sure, I’m putting emphasis on the word speculation. Financially, Coursera leaves much to be desired (as readers will see later). Further, its chart performance leaves little room for credible confidence. Since the January opener, COUR stock has slipped about 4%. In the trailing 365 days, it’s down more than 40%. Also, since its first public trading session, COUR stock has fallen 74%.
It hasn’t been a great day in the office. At the same time, some indicators suggest that COUR stock may eventually regain its mojo. Not too long ago, following the March 9 session, COUR represented one of the highlights of bullishly aligned unusual stock options volume activity.
Specifically, that day’s volume was 514% higher than the trailing one-month average volume. Further, call volume (bullish options bets) reached 9,389 contracts versus put (bearish) volume of only 134.
Another factor that could benefit COUR stock stems from ongoing mass layoffs. Despite a strong labor market, certain sectors, such as technology, have been forced to trim their headcount. As a result, the job applicant market will likely be more competitive, thus boosting Coursera’s relevance.
Also aiding the bull case, on TipRanks, COUR stock has an 8 out of 10 Smart Score rating. This indicates a good chance for the stock to outperform the broader market.
COUR Stock to Rise on Brewing Pertinence
Throughout the post-pandemic new normal, employers had to contend with an incredibly tight labor market. Under this framework, more power shifted to employees. If companies didn’t treat their workers well, they could simply walk away and find a different job rather easily. However, circumstances in the economy appear to be shifting, putting power gradually back into employers’ hands. Cynically, this trend should benefit COUR stock.
To make a long story short, a robust labor force implies that more dollars chase after fewer goods. Unfortunately, this inflationary framework incentivizes the Federal Reserve to tighten monetary policy through interest rate hikes. Subsequently, higher borrowing costs may spark a recession. However, given the scope and scale of inflation, the Fed may need to get aggressive, which may take a “soft landing” off the table.
At some point, then, job losses may ripple throughout the economy on a net basis. When workers can no longer depend on companies competing for their services, they must prove their worth to prospective employers. Here, Coursera’s numerous educational and certification programs may provide an edge over other job candidates.
What’s more, the COVID-19 crisis benefits COUR stock in that the pandemic normalized remote operations. Almost certainly, this normalization extends to remote learning programs. In other words, prior to the pandemic, some skepticism may have existed regarding the substantiveness of online. However, with millions forced to work from home following COVID-19, such hesitation no longer exists.
COUR’s Financials Present a Challenge
Although the fundamental narrative for COUR stock arguably presents an attractive profile, the financials will prove challenging. In particular, Coursera represents an aspirational enterprise, full of hope but also filled with problems.
Operationally, Coursera’s EBITDA has fallen from -$46.9 million in 2019 to -$156.3 million for the trailing 12 months. Also, its operating margin and net margin sit at -31.93% and -33.48%, respectively. Unsurprisingly, then, its return on equity comes in at -24.4%.
To be fair, Coursera enjoys a strong balance sheet, especially its cash balance relative to the amount of debt it holds. As well, its Altman Z-Score (a solvency metric) hits 3.94, indicating low bankruptcy risk over the next two-year period. Still, for COUR stock to make sense, investors must trust the forward narrative over the present financials.
Is COUR Stock a Buy, According to Analysts?
Turning to Wall Street, COUR stock has a Moderate Buy consensus rating based on six Buys, three Holds, and zero Sell ratings. Additionally, the average COUR stock price target is $18.75, implying 58.6% upside potential.
Takeaway: COUR Stock Carries Risks but Also Opportunities
Judging by its financials, it’s clear that Coursera won’t be a walk in the park. As well, the erosion of COUR stock since its debut will concern conservative investors. However, the paradigm of a tight labor market may be shifting negatively, which actually favors the EdTech specialist. Therefore, forward-looking speculators may want to keep close tabs on Coursera.
