What Happened?
Shares of online learning platform Udemy (NASDAQ: UDMY) fell 4.8% in the morning session after KeyBanc Capital Markets downgraded the stock to 'Sector Weight' from 'Overweight'.
The downgrade followed the company's merger announcement with Coursera. In addition to the rating change, the investment firm also removed its price target for the online education provider. This action indicated a more cautious outlook on the stock's prospects following the significant corporate development.
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What Is The Market Telling Us
Udemy’s shares are very volatile and have had 25 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 26 days ago when the stock gained 4.1% on the news that the latest Consumer Price Index (CPI) report showed inflation cooling more than anticipated, fueling optimism for potential Federal Reserve interest rate cuts.
The November report indicated that annual inflation fell to 2.7%, significantly below economists' expectations of 3.1% and its lowest level since July. The Consumer Price Index, or CPI, is a key measure of inflation. This encouraging data was welcomed by investors, as sustained lower inflation could give the U.S. Federal Reserve more justification to lower interest rates in the coming year. Wall Street favors lower interest rates because they reduce borrowing costs for companies and can stimulate economic activity, making stocks more attractive. The positive news helped major indexes, including the S&P 500 and the tech-heavy Nasdaq, snap a four-day losing streak.
Udemy is flat since the beginning of the year, and at $5.56 per share, it is trading 45% below its 52-week high of $10.10 from February 2025. Investors who bought $1,000 worth of Udemy’s shares at the IPO in October 2021 would now be looking at an investment worth $202.00.
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