Citi analysts told investors in a note Tuesday that they are buyers of Udemy, projecting a potential upside of over 100% from current levels.
Despite recent challenges, Citi maintains a positive outlook on the EdTech company, highlighting its robust growth in Udemy Business (UB) amid a difficult environment for Enterprise Learning & Development (L&D).
"Udemy and its investors have endured a tough time of late," wrote the bank. "While overall growth rate for Udemy Business looks robust in a challenged cyclical environment for Enterprise L&D (implied exit rate for UB based guidance is still comfortably above 10%, which isn't bad vs. enterprise L&D exposed peers), ultimately it is the overall growth that counts."
While Citi acknowledged that Udemy has faced a tough period recently, they emphasized that the company's valuation presents a compelling opportunity.
"We rate the group as a Buy with a $20 price target, implying comfortably 100%+ upside from current levels," the analysts wrote.
They point out that even though Udemy's topline growth of around 7% for 2024 may seem underwhelming, the company is compensating by accelerating its profit and free cash flow targets.
While the investment bank admits that a significant rerating of the stock is unlikely until there's clear visibility on revenue growth, which may not occur until late 2025, they still believe that the stock's current valuation is extraordinary.
At just 1x current year enterprise value-to-sales (EV/Sales), the analysts see this as a "great opportunity" for investors with a 12-month horizon.
Overall, Citi's take on Udemy is clear: despite the challenges, the stock offers significant upside potential, making it a strong buy for long-term investors.