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The Udemy IPO date is set for Oct. 29. Of course, you never know if these stocks will go public earlier or later than the set date. If you want the biggest bang for your buck on IPO stocks, best to start eyeing them sooner than later.
The closer you hold your ear to the ground, the better equipped you will be to make a decision when the stock goes public. Either you achieve a massive windfall or avoid a big mistake.
Buying Udemy stock could represent the former case, if you're watching closely.
We recently saw Duolingo Inc. (NASDAQ: DUOL), another online learning company, go public. That one still sits 84% above its IPO price. But the status of an online education company doesn't guarantee gains.
Nerdy Inc. (NYSE: NRDY), another one that recently went public, is down almost 30% since going public via special purpose acquisition company (SPAC). SPACs usually trade around $10 to start, but NRDY has dropped to around $7 in the last month.
Udemy wants to price at a range of $27 to $29 per share, with a valuation of $4 billion. It will sell a total of 14,500,000 shares, which will raise over $420 million at the median price.
Here's why Udemy stock could be the biggest "edtech" buy on Robinhood.
What Is Udemy?
Udemy provides a wide range of education material that anyone can sign up for to learn virtually anything. It's called a "massive open online course" (MOOC), and this one happens to be directed at professionals and students.
In other words, if they want to learn skills related to their profession, they might go to Udemy. If a professional wants to receive a technical certification, Udemy has courses to help them do that.
The story of Udemy is one of gaining quality instructors to meet the demand for certain kinds of knowledge online. That's exactly what Udemy has done.
The company was founded in 2010. It has since grown to serve 44 million students through 480 million courses. More than 65,000 instructors have joined the site and teach in over 75 languages.
Here's what that does for Udemy from a cash flow perspective...
Is Udemy Profitable?
Udemy makes money by offering monthly subscriptions for individual and enterprise clients as well as collecting commissions from instructors.
The individual "Udemy Pro" subscription gets paid monthly at $19.99 per subscription. People who want to learn marketable skills like Google analytics or Amazon Web Services can sign up for this.
Businesses, on the other hand, will pay $360 per user given a team of 5 to 20. That's up to $7,000 per year. If the company has more than 20 users, the pricing is custom. Multiply the $7,000 annual fee with the 7,000 enterprise clients under Udemy's belt, and you get $49 million in revenue.
To be clear, that's not counting the companies with more than 20 users. And Udemy does sign enormous companies like Adidas, Lyft Inc. (NASDAQ: LYFT) and Volkswagen, all of which have thousands of employees and probably sign up for multiple subscriptions or custom agreements.
In October 2020, Udemy reported over $100 million in annual recurring revenue. Total revenue exceeded $400 million.
We still don't know if the company is profitable, but it's likely with how fast it's adding customers and achieving name-brand recognition.
Should You Buy Udemy Stock?
As society makes a gradual shift from big, expensive universities to decentralized, online learning, these will become more commonplace.
The difference is that not all online certifications carry the same weight. You can learn from so many places on the Internet, but so few of them will translate to real-world credentials. It's just hard to parse the web for sound learning versus junk.
Udemy falls on the more reputable end of the spectrum. People recognize the name, and businesses use it to educate their employees. So far, it's done a great job of standing out.
The brand also does not limit its scope as far as what can be learned on Udemy. People have joined to learn yoga, cocktail-making, woodworking, and so much more.
That's only in addition to the stellar adoption it's seen among enterprises. That's what will carry Udemy even further into stardom after its IPO.
For now, the IPO offers a solid cash injection for a company already growing revenue at a rapid pace.
The online education world will only get bigger and tougher. The MOOC market could be worth $25 billion in 2025, according to Global News Wire.
Also, more than 40% of Fortune 500 companies already use e-learning on a regular basis. The remaining 60% will no doubt come across Udemy at some point - if not first - in their search, when e-learning becomes more commonplace.
As an early mover in "edtech," Udemy will be one of the few MOOCs with the resources to hold its own. For that reason, if you can get it at the low end of its range, consider it a buy.
This Stock Could Triple Your Money
About the Author
Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.