Udemy (UDMY) Valuation in Focus Following $50 Million Share Buyback Authorization

If you are tracking Udemy (UDMY) and wondering what could drive the stock’s next move, the latest announcement might be the spark you have been waiting for. On September 10, Udemy’s Board of Directors authorized a share buyback program, giving the company the green light to repurchase up to $50 million of its shares. This kind of move is frequently interpreted by the market as a sign that leadership views the current price as undervalued and has confidence in Udemy’s strategic direction and financial health.

The announcement comes at a complex time for Udemy. Shares have underperformed over the past year, down 14%, and momentum has been sluggish this year with a 19% drop year to date and a 7% slide over the past 3 months. This is occurring even as Udemy reported annual revenue growth and a jump in net income, along with advancing its subscription strategy with a key leadership hire earlier this month to spearhead content and creator development. While the buyback could shift sentiment, it is arriving after a prolonged period of declining market interest in the stock.

After a challenging year but with a renewed commitment from management, some may ask whether Udemy represents a value play for patient investors or if the market is simply adjusting to slower growth prospects.

Most Popular Narrative: 34.4% Undervalued

According to the most widely followed narrative, Udemy is trading well below its estimated fair value, with significant upside potential based on expectations for future growth and margin expansion.

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. In particular, organizations are looking 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.

Curious why analysts see so much hidden value in Udemy? The story behind this bullish outlook is underpinned by bold projections for growth, profitability, and a premium valuation multiple rarely seen outside leading tech names. Want to see what key assumptions are baked into this target? Find out how much confidence the market is placing on future margins and revenues in the full narrative breakdown.

Result: Fair Value of $10.17 (UNDERVALUED)

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

However, ongoing consumer segment weakness and heightened churn among small business clients may limit Udemy’s ability to deliver on this bullish outlook.

Find out about the key risks to this Udemy narrative.

Another View: What Does Our DCF Model Say?

While analysts see hidden value based on future earnings and margins, the SWS DCF model takes a different approach. It estimates what Udemy is actually worth today based on projected cash flows. Its verdict? Still undervalued. But will market sentiment follow the numbers, or are hidden risks being overlooked?

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

If you want to challenge the consensus or prefer to dig deeper into Udemy’s data on your own, it’s easy to craft your own perspective 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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