Over the past six months, Coursera’s stock price fell to $7.03. Shareholders have lost 9.5% of their capital, disappointing when considering the S&P 500 was flat. This may have investors wondering how to approach the situation.
Is there a buying opportunity in Coursera, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons why COUR doesn't excite us and a stock we'd rather own.
Why Is Coursera Not Exciting?
Founded by two Stanford University computer science professors, Coursera (NYSE:COUR) is an online learning platform that offers courses, specializations, and degrees from top universities and organizations around the world.
1. Customer Spending Decreases, Engagement Falling?
Average revenue per user (ARPU) is a critical metric to track for consumer subscription businesses like Coursera because it measures how much the average user spends. ARPU is also a key indicator of how valuable its users are (and can be over time).
Coursera’s ARPU fell over the last two years, averaging 3.8% annual declines. This isn’t great, but the increase in paying users
is more relevant for assessing long-term business potential. We’ll monitor the situation closely; if Coursera tries boosting ARPU by taking a more aggressive approach to monetization, it’s unclear whether users can continue growing at the current pace. 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Coursera’s revenue to rise by 3.7%, a deceleration versus its 18.7% annualized growth for the past three years. This projection is underwhelming and indicates its products and services will see some demand headwinds.
3. Poor Marketing Efficiency Drains Profits
Unlike enterprise software that’s typically sold by dedicated sales teams, consumer internet businesses like Coursera grow from a combination of product virality, paid advertisement, and incentives.
It’s very expensive for Coursera to acquire new users as the company has spent 63.3% of its gross profit on sales and marketing expenses over the last year. This inefficiency indicates a highly competitive environment with little differentiation between Coursera and its peers.
Final Judgment
Coursera isn’t a terrible business, but it doesn’t pass our bar. After the recent drawdown, the stock trades at 21.2× forward EV-to-EBITDA (or $7.03 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now. We’d suggest looking at one of Charlie Munger’s all-time favorite businesses.
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