Shares of online learning marketplace Udemy (UDMY 32.23%) skyrocketed on Friday after the company released strong financial results for the fourth quarter of 2024. As of 12:15 p.m. ET, Udemy stock was up a whopping 33%.
At first glance, investors seem to be overreacting with Udemy stock today. While it did beat expectations on the top and bottom lines, the numbers in isolation weren't necessarily inspiring. For revenue, Udemy generated $200 million, which was only up 5% year over year. Moreover, management only expects 2% growth at most, in 2025. That hardly seems worthy of a 33% stock price gain.
Diving deeper, Udemy stock is quite cheap in light of its surging profitability. Granted, it's measuring profitability with the metric of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), which is an easier one.
That said, its adjusted EBITDA skyrocketed by 451% in 2024 to $43 million. And in 2025, it expects it to further jump to $75 million to $85 million.
Keep in mind that prior to today's jump in price, Udemy stock had an enterprise value of about $700 million. This means that it traded for less than 10 times its 2025 EBITDA, which is about as cheap as it gets. Investors seem to be realizing that price is simply too low for this business, even if its growth rate is modest.
Udemy is becoming more profitable thanks to superb growth in its enterprise subscription business. The company curates its best courses into a subscription product for businesses, and this continued to make strides in 2024. Moreover, it's higher-margin.
In short, its growth rate looks lackluster because the consumer side of its business has been fading, whereas the enterprise side has surged. Udemy's annual recurring revenue was up 11% in 2024. While it would be nice to see a faster growth rate, I think the stock still trades at a bargain price, and could consequently have more upside, given the ongoing gains in the enterprise side of its business.
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