LRN - An Overview Of Stride In The EdTech Landscape

2024-01-02 22:53:54 ET

Summary

• Stride, Inc. has achieved consistent double-digit growth in online education the last 15 years, positioning itself as a trailblazer in the industry.
• The company's strategic acquisitions and innovative school-as-a-service model have contributed to its resilience and adaptability in the dynamic online education sector.
• Stride's impact on three million students and its anticipation of doubling in the future demonstrate its financial robustness and responsiveness to market demands.

Thesis

Stride, Inc. (LRN) has positioned itself as a trailblazer in online education, achieving consistent double-digit growth since 2006. With a focus on diverse learners, it offers a comprehensive suite for K-12 students and adults, leveraging an innovative school-as-a-service model.

Venturing into adult learning in 2020 through strategic acquisitions showcases Stride's visionary approach. Recent market dynamics, such as a 30% stock price surge, affirm its resilience and adaptability in the dynamic online education sector.

In the broader EdTech landscape, Stride's impact on three million students since 2000 sets it apart. Financially robust and responsive to market demands, Stride anticipates a potential doubling in the years ahead with increasing online education adoption.

The company

With a commitment to catering to diverse learners, Stride offers a comprehensive suite of products targeting both K-12 students and adult learners.

At the core of Stride's revenue-generating prowess lies its innovative school-as-a-service model. Collaborating with a spectrum of educational institutions, from public schools to private schools and school districts, Stride provides an all-encompassing package comprising curriculum, resources, administrative services, and a robust software infrastructure. The expansion in the previous year saw Stride extending its school-as-a-service offerings to 87 schools in the General Education segment and 52 schools in the Career Learning segment.

In a strategic maneuver in 2020, Stride ventured into the adult learning market through strategic acquisitions of industry leaders such as Galvanize, Tech Elevator, and MedCerts. This strategic evolution, coupled with the rebranding from K12 to Stride, signifies the company's foresighted vision for long-term growth and diversification. Beyond traditional educational institutions, Stride has ventured into partnerships showcasing a commitment to pushing the boundaries of conventional education.

Recent market dynamics have propelled Stride's stock price with a notable 30% surge following the surpassing of analyst earnings expectations. This upward trajectory suggests untapped potential for further growth, attesting to the company's resilience and adaptability. With an inventive business model, strategic investments, and an unwavering dedication to the future of education, Stride is well-positioned to sustain its success in the dynamic online education sector.

Industry

Zooming out to the broader EdTech landscape, Stride stands out for its unique fusion of defensive and growth-oriented features. Operational since 2000, the company has made a profound impact on over three million students. However, Stride recognizes that its reach is just the tip of the iceberg, with recent U.S. survey results indicating a notable shift in parental consideration toward changing their child's school, and a substantial percentage exploring online alternatives. According to NHERI:

The homeschool population had been growing at an estimated 2% to 8% per annum over the past several years, but it grew drastically from 2019-2020 to 2020-202.

Strategic acquisitions , (Medcerts, Tech Elevator and Galvanize) have positioned Stride to tap into the adult learning sector, aligning with the demands of a robust labor market. The U.S. Bureau of Labor's projection of higher growth rates for expertise requiring non-degree education aligns seamlessly with Stride's specialized offerings, underscoring its adaptability to evolving market demands.

Financials

Financially, Stride's trajectory to profitability in 2006 has been marked by robust growth, boasting an impressive growth in revenues and profits from 2009 to 2023. Notably, even amidst the tumultuous times of the COVID-19 pandemic, Stride's growth momentum accelerated, and the company continues to thrive post-lockdowns in the U.S.

Despite consistent profitability, Stride's strategic decision to reinvest in growth rather than distributing dividends has yielded positive outcomes. This approach facilitated financing for three significant acquisitions totaling $260 million in cash.

In terms of market outlook, Stride's recent quarterly earnings surpassed expectations, triggering a 30% surge in its stock price to $59.

It's noteworthy that Stride appears considerably undervalued when compared to its direct competitors.

Analysts expect a target price for Stride of $64 which has a significant upside of 12%, but Stride can potentially double in the next several years with the adoption of online education becoming more mainstream .

Risks

The threat of cyberattacks or malware looms large over Stride as a result of its prevalent online operations. Remarkably, the company demonstrated adept handling of such incidents in 2020, highlighting its ability to navigate cybersecurity challenges with resilience. Operating within a meticulously regulated industry, Stride must adhere to a range of regulations, including ESSA, IDEA, FERPA, among others, posing potential obstacles. Moreover, the anticipation of intensified competition in the future raises concerns about potential impacts on revenues, margins, and overall growth for the company.

Conclusion

In summary, Stride not only stands as a powerful player in the ever-evolving EdTech realm but also serves as a catalytic force, actively shaping the trajectory of education in the future. Through its unwavering commitment to consistent financial growth, a flexible and responsive business model, and visionary leadership, Stride positions itself on the cusp of enduring success and substantial influence within the dynamic educational landscape. As it continues to navigate the challenges and opportunities of the educational sphere, Stride is well-positioned to be a key driver of positive change, setting new standards and contributing significantly to the transformative journey of education on a global scale.

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