Last Update 17 Mar 26

UDMY: Coursera Merger Will Reprice Execution Risk And Support Higher Future P/E

Analysts have trimmed their average price target on Udemy by $2, reflecting updated assumptions around discount rates and future P/E as they reassess the stock in light of recent downgrades and the pending Coursera merger.

Analyst Commentary

Recent research points to a more cautious stance on Udemy as analysts work through the implications of the pending Coursera merger and refine their valuation frameworks.

Views are not uniformly positive or negative, so it is helpful to separate the key supportive and cautious arguments that are shaping expectations around the stock.

Bullish Takeaways

Bullish analysts view the pending Coursera merger as a constructive outcome for Udemy shareholders, suggesting potential value creation through a combined platform and broader offering.
The merger is seen as directionally supportive for longer term growth potential, as it may align Udemy with a partner that could expand its reach across more learners and institutions.
Supportive voices interpret the merger rationale as a sign that management is focused on shareholder value, which can matter for execution confidence even when near term numbers are being revisited.
Some bullish analysts treat the lack of a specific target from certain research shops as an opportunity for upside if the combined entity executes well and integration proceeds as expected.

Bearish Takeaways

Bearish analysts have lowered their stance on Udemy, including rating downgrades, as they reassess risk around integration, merger timing, and potential changes to the stand alone business model.
The $2 reduction in the average price target signals increased caution around valuation, with analysts revisiting discount rates and P/E assumptions to reflect higher perceived execution risk.
The absence of a formal price target from some bearish analysts highlights uncertainty around the merged company’s financial profile, making it harder for them to anchor on earnings and cash flow outcomes.
More cautious views emphasize that until there is clearer visibility on how Udemy and Coursera will combine operations, growth trajectory and profitability expectations are harder to frame, which can cap near term valuation support.

What's in the News

Coursera agreed to acquire Udemy in an all stock deal valued at approximately US$1b, with Udemy shareholders set to receive 0.800 Coursera shares for each Udemy share. The combined company is expected to trade under the COUR ticker on the NYSE once the deal closes, subject to regulatory and shareholder approvals (M&A Transaction Announcements).
Udemy scheduled a special or extraordinary shareholders meeting for April 9, 2026. This is a key date for investors to watch in the context of the Coursera merger process (Special/Extraordinary Shareholders Meeting).
Udemy reported completion of a US$50m share repurchase program, buying back 7,971,500 shares, or 5.36% of its stock, including 3,873,309 shares, or 2.63%, between October 1 and December 31, 2025 (Buyback Tranche Update).
Udemy launched an expanded end to end AWS certification journey, including access to 12 AWS exam vouchers and course content. The company cited internal research that 59% of U.S. hiring managers rank certification based skills validation as the top hiring factor while 19% prioritize college degrees (Product Related Announcements).
Udemy announced multiple AI focused partnerships and offerings, including a Learn AI with Google subscription that brings Google AI Professional Certificates to more than 84 million learners and a new Udemy app in ChatGPT that embeds course content directly inside OpenAI’s interface (Client Announcements).

Valuation Changes

Fair Value: stays at $7.56, with no change between the prior and updated estimates.
Discount Rate: rises slightly from 7.09% to 7.11%, indicating a modestly higher required return in the refreshed model.
Revenue Growth: remains effectively unchanged at 3.94%, with only a minimal numerical adjustment in the updated assumptions.
Net Profit Margin: is essentially flat at 4.53%, reflecting a stable profitability outlook in the latest inputs.
Future P/E: edges up slightly from 31.17x to 31.20x, indicating a very small increase in the valuation multiple applied to future earnings.

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Key Takeaways

Growing enterprise demand and strategic international expansion are driving pipeline growth, higher retention, and reducing reliance on mature markets.
Subscription model, AI-powered learning, and new monetization streams are increasing margin stability, customer engagement, and recurring revenue.
Increased dependence on enterprise clients and challenges in content quality and customer retention threaten growth, margin expansion, and long-term market competitiveness.

Catalysts

About Udemy

A learning company, that operates a marketplace platform for learning skills in North America, Europe, the Middle East, Africa, the Asia Pacific, and Latin America.What are the underlying business or industry changes driving this perspective?

Acceleration of global upskilling and workforce reskilling due to the widespread adoption of AI and rapid technological change is increasing enterprise demand for Udemy's training solutions, particularly as organizations look for ongoing and personalized skill development at scale; this is leading to a growing pipeline, higher contract values, and early signs of net new ARR growth, supporting future revenue acceleration.
The shift towards a subscription-based revenue model-now comprising around 70% of overall revenue-provides greater earnings predictability, higher gross margins, and improved bottom-line performance as Udemy Business (B2B) wins larger deals and consumer subscription GMV grows >40% YoY, indicating robust future margin expansion and more stable recurring cash flows.
Strategic expansion in international markets, particularly through local partnerships in high-growth regions (e.g., Latin America, India, Japan) and region-specific market activation, is already producing double-digit ARR growth and higher retention rates in markets like Japan, pointing towards strong long-term revenue diversification and lowered dependence on slower-growing North American markets.
Udemy's deepening integration of AI-powered content creation and learning personalization (e.g., AI assistants, roleplay, skill assessment, and context-driven learning in the workflow) is building a data and technology moat, driving up conversion rates, customer engagement, course completion, and ultimately ARPU-translating into both top-line growth and strengthened enterprise client retention.
Emergent revenue streams, such as programmatic advertising on free courses and new AI-focused enterprise SKUs (e.g., AI readiness packages), along with enhanced merchandising, are unlocking untapped areas of monetization and are poised to materially boost revenue per customer and broaden Udemy's total addressable market, further supporting future revenue growth and operational leverage.

Udemy Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Udemy's revenue will grow by 4.7% annually over the next 3 years.
Analysts assume that profit margins will increase from -3.9% today to 8.2% in 3 years time.
Analysts expect earnings to reach $75.1 million (and earnings per share of $0.56) by about September 2028, up from $-30.6 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $87.4 million in earnings, and the most bearish expecting $-64.1 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.3x on those 2028 earnings, up from -33.0x today. This future PE is greater than the current PE for the US Consumer Services industry at 20.4x.
Analysts expect the number of shares outstanding to grow by 3.04% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.08%, as per the Simply Wall St company report.

Udemy Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The Consumer segment revenue is expected to decline by approximately 8% year-over-year for 2025, indicating persistent weakness in the direct-to-consumer side of the business despite green shoots; this ongoing softness may put pressure on total revenue growth and limit overall earnings potential.
The company is working through the renewal of large COVID-era contracts, particularly among small and medium business (SMB) customers, which have resulted in higher churn and lower expansions; lack of robust implementation and value alignment in these contracts is causing short-term headwinds for net dollar retention and recurring revenue stability through at least the rest of 2025.
While Udemy emphasizes differentiation through AI-powered offerings and marketplace agility, advances in AI-driven personalized learning from larger tech companies and increasing adoption of enterprise Learning Management Systems (LMS) could erode Udemy's long-term competitive advantage, impacting both market share and margin expansion.
The shift towards enterprise and subscription models generates higher predictability and potential margins, but the current upmarket focus contributes to a decline in SMB customers, naturally shrinking the customer base and increasing dependency on fewer, larger deals-exposing Udemy to concentrated revenue risk if large clients churn or reduce spending.
Heavy reliance on third-party instructors for rapid content creation means that maintaining content quality and consistency will remain challenging as the platform scales; further, the proliferation of free high-quality content and discount-driven pricing strategies could continue exerting downward pressure on average revenue per user (ARPU) and limit near
to medium-term improvements in net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $10.173 for Udemy based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $12.0, and the most bearish reporting a price target of just $9.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $913.6 million, earnings will come to $75.1 million, and it would be trading on a PE ratio of 27.3x, assuming you use a discount rate of 7.1%.
Given the current share price of $6.72, the analyst price target of $10.17 is 33.9% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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