Coursera (NYSE:COUR) has encountered a setback as Goldman Sachs analyst Eric Sheridan downgraded the online education provider’s stock from “neutral” to “sell” while lowering the price target to $14, a 20% downside risk from the previous target of $18. The main cause cited for this downgrade is the potential impact of generative AI on the edTech landscape, creating uncertainties about learner behavior and user growth.
Sheridan’s concerns about the rise of generative AI also prompted downgrades for two other companies, Chegg (NYSE:CHGG) and Duolingo (NASDAQ:DUOL). The versatility of AI, exemplified by platforms like ChatGPT, poses a challenge to traditional learning programs by providing dynamic and relevant responses beyond predetermined course frameworks.
However, Coursera, known for offering degrees and professional certifications in collaboration with top academic and business institutions, may be less susceptible to AI threats. Some argue that AI could be a positive catalyst for Coursera, contrary to Goldman’s downgrade.
Despite the 10% decline in COUR stock following the Goldman Sachs announcement, bullish options activity suggests unwavering confidence among investors. Notably, call volume surpassed put volume, resulting in a put/call volume ratio of 0.42, indicating a bullish sentiment. Major institutional transactions, such as the purchase of COUR Feb 16 ’24 20.00 Call and 22.50 Call contracts, reinforce the belief in Coursera’s long-term potential.
While the Goldman downgrade initially impacted COUR stock, the smart money appears to believe in its resilience. A significant entity’s sale of 1,795 contracts of the $20 call suggests bearish sentiment, but with time before the Feb. 16 expiration, bullish speculators may seek opportunities to challenge this short call.
Addressing the broader landscape of generative AI, investors should be cautious about its perceived omnipotence. Google’s Bard, an experimental conversational AI service, revealed limitations when asked historical questions, highlighting potential pitfalls in digital intelligence. This underscores Coursera’s value in providing human-centric education that promotes critical thinking and nuance.
In essence, while Coursera faces challenges from the evolving AI landscape, the bullish options activity and the platform’s commitment to human-centric learning signal resilience and long-term value for investors.
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