What Happened?

Shares of online learning platform Coursera (NYSE:COUR) fell 23.6% in the morning session after the company reported underwhelming third-quarter earnings as it lowered its full-year revenue guidance, which also fell below Wall Street's expectations. However, revenue beat by a narrow margin, though EBITDA beat by a more convincing amount. The underperformance was driven partly by weakness in the Enterprise segment as Net Retention Rate for Paid Enterprise Customers fell to 89%, down from 93% in the previous quarter. The Degrees segment is also partly to be blamed as revenue declined again quarter on quarter.

Moving on to the bottom line, the company announced an initiative to realize $30 million in cost savings, including plans to reduce its workforce by 10%. This enabled the company to raise FY'24 adjusted EBITDA guidance by 5.4%. Overall, this was a weaker quarter for the company, with the market likely concerned about the weak sales outlook.

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What The Market Is Telling Us

Coursera’s shares are quite volatile and have had 15 moves greater than 5% over the last year. But moves this big are rare even for Coursera and indicate this news significantly impacted the market’s perception of the business.

The biggest move we wrote about over the last year was 3 months ago when the stock gained 54.9% on the news that the company reported second-quarter earnings results. Coursera increased its number of users. Its revenue and adjusted EBITDA also outperformed Wall Street's estimates. Notably, sales across all major operating segments exceeded Wall Street's estimates, and the company surpassed two million enrollments for its generative AI courses. That the company maintained full-year guidance for revenue, and adjusted EBITDA means it's squarely on track. Overall, this quarter was solid.

Coursera is down 63.7% since the beginning of the year, and at $7.01 per share, it is trading 66.7% below its 52-week high of $21.04 from December 2023. Investors who bought $1,000 worth of Coursera’s shares at the IPO in March 2021 would now be looking at an investment worth $155.67.

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