Coursera (COUR -1.18%) is teaching a very practical lesson on the effect of gravity. One trading day after its share price soared following encouraging quarterly results, it closed down sharply. On the back of profit taking and a negative analyst note from a prominent investment bank, the online provider of college-level courses shed nearly 13% of its value on Monday. That was notably worse than the basically flat performance of the benchmark S&P 500 index.
The Monday hangover
On Friday, investors couldn't get enough of Coursera (a monster bottom-line beat will do that), but a certain pundit wasn't as impressed with the company. Eric Sheridan of Goldman Sachs (GS -0.87%) reduced his price target on the stock by 10% before market open Monday. He now feels it is worth $9, down from the previous $10.50, and has maintained his sell recommendation.
The reasoning behind Sheridan's move wasn't immediately clear. He's been a Coursera bear for months, having downgraded his recommendation from neutral to sell in January.
Often, the downside of a sharp post-earnings price surge is the temptation for investors to sell out of their positions immediately to book quick profits. It's very likely that this dynamic also contributed to Coursera's Monday swoon.
Steady as she goes
Long-term investors should try their best not to be spooked by dramatic share price movements in their favored titles. Markets tend to overreact, and it can occasionally take some time for a stock to find equilibrium.
In Coursera's case, there was much to like about its second-quarter results, particularly that explosive earnings beat and its 11% year-over-year increase in sales.
