IPO Coursera: University on the Couch | R Blog RU


Many people, having received their first higher education, understand that the soul lies with another, or the specialty received does not imply a high salary and a decent standard of living. Previously, in this case, people had to get a second education at the university, go to retraining courses or comprehend a new craft from books by self-education.
With the development of the Internet, a lot of educational resources and the first online courses have appeared. But only with the advent of entire educational platforms, it became possible to gain knowledge at the university level online. Coursera has become one of the leading platforms in this area.

Company COURSERA, INC… On March 5, she submitted an S-1 application for an IPO on the NYSE. Let’s take a closer look at the company’s business model, its financial results and competitive advantages. At the end of our article, we will draw a conclusion about the advisability of investing in Coursera shares.

Business COURSERA

The company was founded in 2012 by two professors from Stanford University Andrew Ng) and Daphne Koller… The post of CEO is held by Jeff Maggioncalda, who already has experience in listing a company – we are talking about a company Financial Engines, whose IPO took place in 2018. Coursera’s main investors are venture funds NEA, Future Fund, GSV Capital and Kleiner Perkins. The history of the company’s development is shown in the picture below.

History of Coursera

Coursera is one of the world’s best online education platforms. Users register for the course they are interested in and undergo training on the company’s website or application. The teaching methodology is as close as possible in style to the program of universities. At the end of the course, the student can receive a certificate recognized by the relevant university.

Business Coursera

As of the end of 2020, over 150 universities offered over 4,000 specialized courses on Coursera. In more than 25 specialties, the possibility of obtaining a junior scientific degree has been realized, at a price significantly lower than full-time education. It costs between USD 9,000 and USD 45,000 to get a bachelor’s or master’s degree on the platform.
As of the reporting date December 31, 2020, 77 million students were trained on Coursera.

Business Coursera

The company is ranked 4th on CNBC’s Disruptor 50 rankings. It includes private firms, whose business influences market and business competition at an increased rate. A separate type of Coursera business is professional development courses from leading global multinational companies such as Google, Microsoft, Amazone, IBM and others. Having a certificate of completion of such courses can become a significant competitive advantage when submitting a resume to the above companies.
The coronavirus pandemic that began in 2020 gave an additional impetus to the development of Coursera’s business.

Market and competitors COURSERA

According to the analytical company HolonIQ, the world market of educational services in 2019 amounted to 2.2 trillion USD. Online learning accounted for USD 36 billion. Since we are at the stage of transformation of the global technical and economic order, the need for new or improving existing skills will only increase. Therefore, according to HolonIQ, the online education market will reach 74 billion USD by 2025. Thus, the average annual market growth will be more than 20%.

This will allow companies in the industry to demonstrate growth rates of over 50% annually, making them attractive to both aggressive investors and conservatives.

Coursera’s main competitors are Udemy and Fiverr Learn… If we talk about Fiverr, then this platform poses the least danger to Coursera, as it only offers 29 digital marketing and creative courses. The platform positions itself as a resource for freelancers or those looking for a part-time job. There is no question of obtaining any academic degree or university certificate. Fiverr Learn is not yet a public company, but it is a fairly popular platform in its niche.

Udemy is a stronger competitor for Coursera. More than 100,000 different courses are concentrated on the platform. Here you can find both an academic course and material for acquiring a beautiful or unusual hobby. The quality of the courses on the platform is at a high level, but they are not accredited by universities. Therefore, the student will not receive any recognition of knowledge or academic degree here.

Financial performance of the company

Coursera Inc. at the time of filing an IPO application does not generate net income. Therefore, we will begin our analysis of its financial condition with the proceeds. This indicator best reflects the growth rate of the company’s business and its market share.

Financial performance of Coursera

As of December 31, 2020, the company’s revenue amounted to USD 293.51 million, which is 59% more than a year earlier. We can also see from the detailed reporting that the highest revenue growth rates were recorded in the second quarter of 2020.

Financial performance of Coursera

As you can see, from April to June this figure increased from 53.85 million USD to 73.73 million USD. The relative growth was 36.92%, although the average revenue for the quarter is growing by 9-11%.

Financial performance of Coursera

The greatest surge of interest among users of the platform was caused by the emergence of the possibility of obtaining an academic degree – the number of those who received a degree increased by 97% in a year. As of December 31, 2020, there were USD 79.88 million of cash on the company’s balance sheet. The net loss is USD 66.82 million. However, a positive fact here is the growth of gross profit by 54% from USD 89.59 million to USD 138.85 million.

Note that the positive effect of the COVID-19 pandemic had a significant impact on revenue growth. But even without it, the growth rates of this indicator are worthy of the attention of a competent investor. Growth in gross profit gives reason to expect net profit in the near future.

Strengths and weaknesses of COURSERA

Taking all of the above into account, let’s highlight the strengths and weaknesses of Coursera Inc. We can refer to the undoubted advantages of the company:

  • High rates of revenue growth by 59% annually.
  • Coursera operates in the fast-growing online education market, which could reach USD 74 billion by 2025.
  • Business has strengthened during the coronavirus pandemic.
  • Coursera partners with the leading companies in the S&P 500 and Nasdaq 100.
  • The company works with US universities and government agencies from 300 countries.
  • Coursera is ranked # 4 on CNBC’s Disruptor 50 rankings.

The risk factors for investing in Coursera include:

  • Dependence on cooperation with universities and government agencies.
  • The presence of a strong competitor-analogue of Udemy.
  • The company is unprofitable and does not pay dividends.
  • The company’s management did not undertake to predict the impact of the attenuation of the COVID-19 pandemic on revenue.

IPO details and COURSERA capitalization assessment

Coursera raised $ 443.1 million in funding rounds. The placement underwriters were Loop Capital Markets LLC, William Blair & Company, LLC, Telsey Advisory Group LLC, Needham & Company, LLC, Citigroup Global Markets Inc., UBS Securities LLC, KeyBanc Capital Markets Inc., Raymond James and Associates, Inc., Stifel, Nicolaus & Company, Incorporated, Truist Securities, Inc., William Blair & Company, LLC, DA Davidson & Co., Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC.

The volume of the borrowing application amounted to standard USD 100 million. The date of the IPO is not yet known and is determined by the underwriters. To estimate the capitalization, we will use the P / S ratio (multiplier) (revenue / capitalization), since the similar companies are not public, and Coursera does not bring net profit. The average P / S for the tech sector is 10, so the company’s capitalization could reach USD 2.94 billion (USD 293.51 million * 10).

Due to a number of competitive advantages, strong financial results and a fast growing market, I recommend Coursera shares for inclusion in a medium and long-term investment portfolio.

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