Digital education is transforming the global learning landscape. What began as a temporary shift during the pandemic has gained unstoppable momentum. As more organizations and institutions embrace online learning, its impact continues to expand, paving the way for a future where digital education plays a central role in learning.

The rising significance of self-paced online learning courses, a growing number of subscribers for a wide range of digital education platforms, and demand for enhanced digital learning experiences, starting from basic literacy to the development of advanced professional skills, have all contributed to the widespread relevancy of digital education.

Amid this expansive landscape, Udemy, Inc. (UDMY - Get Rating) stands out with its expansive catalog for reskilling or upskilling in technology, business, soft skills, and personal development.

Recently, the company reported an addition of eight million new learners and 1,400 new enterprise customers into its platform in 2024. The steady user growth signifies UDMY’s widespread popularity as a top choice for digital education for individual users and organizations as well.

Reflecting its strong market position and growth potential, UDMY’s stock has climbed 10% over the past nine months, closing its latest trading session at $7.82.

Now, let us discuss the factors that could affect the stock’s growth trajectory.

Recent Developments

In its most recent earnings release, UDMY reported steady business and operational achievements. The company announced the addition and expansion of relationships with Udemy Business customers all over the globe, including Analog Devices (U.S), Arm (UK), Akbank (Turkey), E. ON (Germany), Grupo Bancolombia (Colombia), and Innovaccer Analytics Private Limited (India).

Additionally, the company also opened a new office in Mexico City, Mexico. Aimed at scaling its operations and delivering personalized learning experiences to its users in the LATAM market, the expansion could prove to be a catalyst for its market presence in the Latin American market.

Moreover, UDMY announced a partnership with Ingram Micro to expand its upskilling opportunities across Ingram Micro’s distribution network in India. The partnership also aims to enhance its customers’ experience through access to Udemy Business products and solutions.

Furthermore, on October 22, 2024, UDMY announced new AI capabilities to aid organizations in creating dynamic and personalized learning programs at scale. With the growing popularity of corporate learning programs, UDMY’s new AI offerings could drive its user growth and enhance the company’s market position in the digital education sector.

Stable Historical Growth

UDMY’s prospects are quite apparent from its consistent growth across key financial metrics. The company’s revenue grew at a CAGR of 16.6% over the past three years. Additionally, over the same time frame, its total assets exhibited a CAGR of 28.1%.

Sound Financials

For the fiscal 2024 fourth quarter that ended December 31, 2024, UDMY’s revenue increased 5.5% year-over-year to $199.94 million. Its non-GAAP gross profit rose 14.6% from the year-ago value to $128.82 million.

Additionally, the company’s non-GAAP net income and non-GAAP net income per share grew 306.1% and 400% from the prior year’s quarter to $15.53 million and $0.10, respectively.

Optimistic Analyst Estimates

Analysts expect UDMY’s revenue and EPS for the fiscal 2025 first quarter ending in March to increase 2.3% and 166.7% year-over-year to $201.37 million and $0.08, respectively. Additionally, the company has surpassed consensus revenue estimates in three of the four trailing quarters.

Looking ahead to the fiscal 2025 second quarter ending in June, UDMY’s revenue is expected to rise 2.8% from the prior year’s period to $199.83 million. Its EPS for the same period is expected to come in at $0.08.

Robust Profitability

UDMY’s trailing-12-month gross profit margin of 61.14% is 62.4% higher than the industry average of 37.66%. Its trailing-12-month levered FCF margin stands at 14.74%, 226.1% higher than the industry average of 4.52%. Also, the stock’s trailing-12-month asset turnover ratio of 1.15x is 15.7% higher than the industry average of 1.00x.

POWR Ratings Reflects Optimism

UDMY’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

UDMY has a B grade for Growth, in line with its impressive historical growth metrics. Within the A-rated Outsourcing – Education Services industry, UDMY is ranked #5 out of 19 stocks.

To access UDMY’s Stability, Sentiment, Quality, Value, and Momentum ratings, click here.

Bottom Line

UDMY stands out in the digital education sector with robust industry prospects. Its global market expansion and strategic partnerships offer extensive upskilling opportunities worldwide.

The company’s commitment to AI integration underscores its forward-looking strategy. Coupled with impressive financial performance and a growing course catalog, UDMY is poised for continued growth and potential stock appreciation.

How Does Udemy, Inc. (UDMY) Stack Up Against Its Peers?

Although UDMY’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who exhibit even stronger POWR Ratings. So, consider these A (Strong Buy) and B (Buy) rated stocks from the Outsourcing – Education Services industry:

Adtalem Global Education Inc. (ATGE - Get Rating)

Perdoceo Education Corporation (PRDO - Get Rating)

QuantaSing Group Limited (QSG - Get Rating)

To explore more A or B-rated Outsourcing – Education stocks, click here.

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UDMY shares rose $0.12 (+1.53%) in premarket trading Friday. Year-to-date, UDMY has declined -4.98%, versus a 4.04% rise in the benchmark S&P 500 index during the same period.

About the Author: Aritra_Gangopadhyay

Aritra is a financial journalist dedicated to breaking down complex financial topics into simple, actionable insights. Holding a Master’s degree in Economics, he uses his analytical expertise to help investors uncover unique opportunities for long-term success. More...

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