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Udemy (NASDAQ: UDMY) is a company that recently went public. Shares of Udemy were listed on the NASDAQ last month and the company is currently valued at a market cap of $2.55 billion. Udemy offers technical and business skills in addition to personal development courses for individuals and enterprises. The Udemy platform allows access to 183,000 courses in 75 languages.
In late October, Udemy announced the pricing of its IPO (initial public offering) of its common stock at $29 per share. Udemy offered 14.5 million shares as well as another 2.175 million shares to underwriters raising more than $400 million in the IPO.
At the time of writing, UDMY stock is trading at $18.4 which is 50% below its issue price. Let’s see if the dip provides a buying opportunity for investors.
Udemy reports Q3 results
In Q3 of 2021, Udemy reported revenue of $129.6 million, an increase of 9% year over year. It reported a net loss of $1.7 million or $0.04 per share, compared to a net income of $4.7 million or $0.14 per share in the year-ago period. Udemy’s adjusted gross profit rose to $72.2 million, up from $69.6 million in Q3 of 2020. Its adjusted EBITDA however narrowed to $1.6 million from $8.1 million.
The company’s Business revenue rose by 84% to $50.4 million while annual recurring revenue in this segment was up 80% at $207.4 million. Udemy Business ended Q3 with 9,592 customers, up 42% year over year. This vertical enjoys a net dollar retention rate of 118% which suggests existing customers increased spending by 18% on the platform in Q3.
Udemy continued to onboard major enterprises across verticals on its platform including Mitsubishi Chemical, Alcoa, and used car giant Carvana. In Q3, the company also launched Udemy Business pro which features labs and assessments. Further, it acquired CorpU, an entity that specializes in cohort-based leadership training programs for Fortune 500 companies.
What next for UDMY stock investors?
Udemy now aims to leverage machine learning capabilities to enhance search functionalities which in turn will provide personalized recommendations to users and improve conversion and retention rates within its business segment.
Company CEO, Gregg Coccari explained, “Our differentiated marketplace model enables us to continuously deliver high-quality and relevant content across in-demand skills in local languages to our global customers.”
He added, “As a result of increasing demand for upskilling and reskilling in workplaces around the world, revenue for Udemy Business grew 84% year over year and ending ARR exceeded $200M. As learners, instructors, and companies face an accelerating pace of change, Udemy is well-positioned to provide the critical skills people need to succeed in today’s workplace.”
Udemy has forecast Q4 sales between $130 million and $134 million with an adjusted EBITDA loss between $28.5 million and $24.5 million. This will result in 2021 sales between $510.2 million and $514.2 million with adjusted EBITDA loss between $31.4 million and $27.3 million.
Udemy reported Q4 revenue of $110 million in 2020 while total sales for the year stood at $430 million.
The company estimates its total addressable market at $200 billion which provides it with enough room to expand top-line in the upcoming decade. Analysts in fact expect Udemy to report $630 million in sales valuing UDMY stock at a forward price to sales multiple of less than 4x which is quite reasonable.
Wall Street also expects UDMY stock price to increase by 90% to $34.7 in the next 12-months, making it a top bet right now.
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