Citi analysts have expressed a positive outlook on Udemy, an EdTech company, stating that the stock could see a potential upside of more than 100% from its current valuation.
In a recent investor note, Citi highlighted Udemy’s impressive growth in its Udemy Business (UB) segment, even as the broader Enterprise Learning & Development (L&D) sector faces difficulties. The analysts noted that while the company has experienced challenges, the growth prospects for UB remain solid, with a projected exit rate comfortably exceeding 10%.
Citi acknowledged the tough times that Udemy and its investors have endured but emphasized that the current stock valuation presents a compelling opportunity. The analysts have set a $20 price target for the stock, which implies an upside of over 100% from its present levels.
Although Udemy’s expected topline growth of around 7% for 2024 might seem modest, Citi pointed out that the company is focusing on accelerating its profitability and free cash flow targets. The bank also noted that while a significant reevaluation of the stock might not happen until there is more clarity on revenue growth, which could be delayed until late 2025, the current valuation offers an attractive entry point for investors.
With a current enterprise value-to-sales (EV/Sales) ratio of just 1x, Citi analysts believe that Udemy represents a “great opportunity” for investors with a 12-month investment horizon.
In conclusion, despite the recent challenges faced by Udemy, Citi remains optimistic about the stock’s long-term potential, making it a strong buy recommendation for investors looking to capitalize on its growth prospects.
