Udemy shares were boosted by analysts, with massive growth at discounts

    photo of the udemy logo displayed on your mobile device in your jeans pocket

Key points

  • The private education sector just experienced its first boom of the quarter, potentially launching a new trend.
  • There’s more than one reason to consider Udemy a winner in this space; the markets agree.
  • Analysts have tightened their targets and markets are on board with a triple-digit growth story.
  • 5 stocks we like best on Coursera

Some industries have been waiting for reform for some years – more or less decades – and private education is one of them. Curriculum and teaching that once worked may no longer be valid in today’s rapidly changing economy and job market. Overwhelmed by technology and the growing size of the “online economy,” there’s one stock that could soon grab investors’ attention.

The name? Udemy NASDAQ: UDMY stocks, and for reasons you’ll soon discover, there are plenty of reasons why some of the biggest names on Wall Street are joining the bull party by upgrading the stock and its price targets. Even some big bank prop traders may find sufficient motivation behind a potential purchase of UDMY stock.

Even its closest competitor, Coursera NYSSE: COURTYARD, they fail to offer value with the same attractive discounts that Udemy offers. Surprisingly, Udemy continues to lead above Alphabet NASDAQ:GOOGL and its own teaching platform in Google Certificates. You should read it if your portfolio needs to catch up with the gains seen in NASDAQ names hitting all-time highs today.

The whole enchilada

When professional traders at an investment bank or hedge fund start their day wondering, “Where should I look to allocate money,” the story begins a little like this. Through a process called “top-down” analysis, these traders will likely begin digging into economic data to pinpoint specific outlier sectors to consider.

One of the main economic indicators these traders look at is the ISM Manufacturing/Services PMI Index, where you can find a direct indicator of industrial activity. This can also make it much easier for you to find pockets of the economy that are worth a second look.

So, what does PMI say about the education space? After showing a relatively flat reading in November and a slight contraction in December, the education services sector showed newfound expansion to start the new year.

Now, imagine that you are a manager or entrepreneur who is expecting a new trend of expansion and demand in your business or those around you. If that happens, it’s very likely that “hiring” ads will be spread across the board. After all, you will need employees to cater to the expansion business, right?

This is why the second most important economic indicator, the Employment Situation Report (better known as NFP), shows the same trend. The U.S. economy added 353,000 jobs in total. And 11,800 (3.3%) went to private education services, not those with public education systems.

Are you starting to get the bigger picture now? Good, because there’s more. Udemy’s stock has been left behind by the broader market SPDR Technology Select Sector Fund NYSEARCA: XLK by as much as 25.4% in the last twelve months.

Last time the market checked, Udemy was still a tech stock, so now you have a double-digit gap to fill versus the sector. Analysts and markets know this, which is why they are starting to weaken the stock for a killer rally ahead.

Fill the gap

Starting from the targets of the analysts, those who work Morgan Stanley NYSE: MS they felt comfortable raising their view from $12 per share to $15 per share, expecting a net upside of 3.4% from today’s prices. You will soon realize that these goals may well fall on the conservative side of the spectrum.

Financial trustee New York Stock Exchange: TFC analysts also arrived at a $15 price target which, along with Morgan Stanley’s targets, could soon be overdue for a raise. At least, that’s what the market seems to think when it values ​​the stock its way.

Two things will become apparent to you in the following Udemy vs. Coursera analysis for a closer comparison. We first need to consider how much analysts expect earnings per share to grow over the next twelve months. Second, how much are markets willing to pay for this growth?

With expected EPS growth of 580% next year, analysts place Udemy a cut above Coursera, which is forecast to grow just 70.6%. Now, which company would you rather pay a premium for? Above-average growth is obviously worth paying for.

Based on price-to-book ratio, which may be a better way to value these stocks with upcoming changes in interest rates set by the Fed, Udemy is in the spotlight. At 6.4x, it stands at a 44.9% premium above Coursera’s 4.4x rating. Remember the saying, “It has to be expensive for a reason.”

Now you know why, and other professional investors – and traders alike – will likely jump on this justified growth story.

Before you consider Coursera, you’ll want to hear this.

MarketBeat tracks daily Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and Coursera wasn’t on the list.

While Coursera currently has a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.

View the five stocks here

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