Udemy (UDMY): Assessing Valuation After Strategic Middle East Expansion and New Leadership Appointment

If you have been watching Udemy (UDMY) lately, there is a good chance that its recent moves have caught your attention. The company just unveiled an Arabic-language version of its platform, a step that could open up access to more than 300 million potential learners across the Middle East and North Africa. In addition, Udemy named Ramji Sundararajan, an executive with a proven track record in digital consumer businesses, as its new President of Consumer. Together, these actions seem aimed at one thing: tapping into fresh markets and accelerating user growth as demand for upskilling surges worldwide.

These strategic choices come at an interesting juncture for Udemy’s stock, which has struggled in the past year, slipping 15% even as it pushes new initiatives. While momentum has faded since early 2024, investors have now seen a one-month dip and a modest three-month decline. This suggests the market is taking a closely measured view of Udemy’s efforts. Recent international expansions and leadership changes have yet to turn sentiment fully positive, but they underline a clear intent to re-energize the business.

So, after a year of lackluster returns and with Udemy now doubling down on global expansion, the big question becomes: is there real upside here for long-term investors, or is the market already anticipating future growth in the current price?

Most Popular Narrative: 33% Undervalued

According to community narrative, Udemy is seen as significantly undervalued compared to what analysts believe it’s worth, based on bullish assumptions about future earnings and margin growth.

"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 over 40% year over year. This indicates robust future margin expansion and more stable recurring cash flows."

Can Udemy really deliver on these bold expectations? The foundation of this narrative is a dramatic transformation in where and how the company makes its money. Are you ready to see what explosive revenue mix and profit targets could back a price 30% higher than today? The answers may surprise you.

Result: Fair Value of $10.17 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent weakness in Udemy’s consumer segment and heightened churn from expiring contracts could pose challenges to the expected upside for investors.

Find out about the key risks to this Udemy narrative.

Another View: What Does Our DCF Model Reveal?

Looking at Udemy through the lens of our DCF model, the conclusion also points to the shares being undervalued, although for different reasons than the analyst consensus. It is possible that the true value lies somewhere in between these approaches.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Udemy for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Udemy Narrative

Keep in mind, if you see the story differently or want to dig into the numbers on your own, you can shape your own take in just a few minutes. do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Udemy.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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