Why Udemy (UDMY) Shares Are Declining Today

Recent Developments

Udemy (NASDAQ:UDMY), an online education provider, experienced a 4.8% decline in its share price during morning trading after KeyBanc Capital Markets revised its rating for the company from 'Overweight' to 'Sector Weight'.

This downgrade came on the heels of Udemy's announcement regarding its merger with Coursera. Alongside the rating adjustment, KeyBanc also withdrew its price target for Udemy, signaling a more reserved stance on the company’s future following this major corporate event.

Market reactions to news can sometimes be exaggerated, and significant drops in share price may offer attractive entry points for investors seeking quality stocks. Considering this, could now be a favorable moment to invest in Udemy?

Market Perspective

Udemy’s stock is known for its volatility, having seen 25 instances of price swings greater than 5% over the past year. In this context, today’s decline suggests that investors view the recent news as significant, but not transformative for the company’s overall outlook.

The last notable movement occurred 26 days ago, when Udemy’s shares rose by 4.1%. This uptick followed a Consumer Price Index (CPI) report indicating that inflation was easing more than expected, which boosted hopes for potential interest rate reductions by the Federal Reserve.

The November CPI data revealed that annual inflation dropped to 2.7%, well below the forecasted 3.1% and marking the lowest rate since July. As the CPI is a primary indicator of inflation, this positive surprise was welcomed by investors. Persistently lower inflation could provide the Federal Reserve with more reason to lower interest rates in the coming year. Lower rates are generally seen as beneficial for businesses, as they reduce borrowing costs and can stimulate economic growth, making equities more appealing. This optimistic outlook helped major indices like the S&P 500 and Nasdaq recover after a four-day decline.

Since the start of the year, Udemy’s stock has remained largely unchanged. Currently priced at $5.56 per share, it sits 45% below its 52-week peak of $10.10 reached in February 2025. For context, an investor who purchased $1,000 of Udemy shares at its IPO in October 2021 would now see that investment valued at just $202.00.

Many industry giants, including Microsoft, Alphabet, Coca-Cola, and Monster Beverage, began as lesser-known companies capitalizing on emerging trends. We believe we’ve identified the next big opportunity: a profitable AI semiconductor company that has yet to catch Wall Street’s full attention.