Coursera (COUR 0.51%) stock charged out of the gate Friday morning, surging 51% through 9:40 a.m. ET after announcing beats on both top and bottom lines.
Heading into Coursera's second-quarter report last night, analysts forecast the online education company would earn a $0.01 per share adjusted profit on sales of $164.4 million. Coursera beat both predictions, however, reporting adjusted profits of $0.09 per share and sales of $170.3 million.
NYSE: COUR
Key Data Points
Coursera's big earnings beat
Not all the news was good. Although Coursera grew sales by 11% year over year and moved beyond last year's break-even profit to a positive "adjusted" profit, the company didn't earn a generally accepted accounting principles (GAAP) profit. When calculated according to GAAP, Coursera's "earnings" were actually a $0.15 per share loss.
Still, that was better than the $0.21 per share Coursera lost one year ago. That's a win for Coursera.
Coursera also generated positive free cash flow (FCF) in the quarter -- $17 million -- versus burning cash in last year's Q2. The company showed strong revenue growth in all three business segments, with enterprise revenue up 8%, consumer revenue up 12%, and revenues from degree programs rising 14%. CEO Ken Hahn pronounced himself "pleased" with all these results.
Is Coursera stock a buy?
But is all this enough to make Coursera stock worth 50% more today than it was yesterday?
Actually, it might be. On the one hand, guidance isn't all that great, with Coursera promising no more than the $700 million or so in revenue that Wall Street was already expecting. On the other hand, consider that at $1.75 billion in market cap, Coursera stock might cost only 25 or so times FCF -- if it can continue generating $17 million in FCF quarter-in and quarter-out. That's not a terrible valuation, given the quick flip to FCF positivity.
True, current analyst estimates show Coursera generating only $55 million in FCF next year. However, these same analysts were wrong about Coursera in Q2, and they could be wrong again.
