Stride, Inc. (LRN) has announced results for its second fiscal quarter, exceeding expectations with significant growth in revenue, operating income, and net income. The technology-based education service company, known for its diverse online learning programs and education services, also experienced an increase in enrollments, particularly in its Middle-High School programs. Following this successful quarter, Stride has adjusted its revenue outlook for FY25 upwards to $2.32-$2.36 billion versus the consensus analysts’ projection of $2.29 billion.
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The stock is up over 111% in the past year and looks to carry that positive momentum forward. Investors interested in exposure to education stocks and the growing homeschooling market may find this one compelling.
Serving Growing Homeschool Demand
Stride is a leader in technology-based educational services, offering online and blended programs tailored to students of various ages and backgrounds. Its comprehensive offerings include K-12 Online Public Schools, a fully online curriculum funded by state-based virtual charter schools throughout the United States. In addition to its educational offerings, Stride provides a range of services to schools and districts, including an online curriculum, software systems, and other essential educational services.
Additionally, Stride provides homeschooling support by delivering customized curricula and additional resources for homeschooled students.
Over recent years, the rate of homeschooling has increased significantly. The National Center for Education Statistics estimates the number of homeschooled children in the United States to be between 1.9 million and 2.7 million. This significantly rose from the 1.5 million homeschooled children recorded pre-COVID-19 in 2019.
The future of homeschooling appears to be on a trajectory of continued expansion and diversification. Recent statistical data reveals a 51% growth in homeschooling enrolments over the past six years among states with comparable figures. This increase significantly outpaced the growth in private school enrollments, which only rose by 7% in the same period. In contrast, public school enrollment experienced a 4% decline.
Optimistic Forward Guidance
For the recent fiscal second quarter, Stride reported an impressive financial performance with a revenue of $587.2 million, marking year-over-year growth of 16.3% while beating market expectations. Notably, revenue from career learning for middle and high school students soared by 29.1%, offsetting the 23.4% decline in career learning for adults. GAAP earnings per share of $2.03 exceeded analyst projections by $0.09.
Management has issued guidance for the third quarter and expects revenue to be between $585 million and $600 million, exceeding the market consensus of $572.2 million. Further, Stride has optimistically revised its revenue forecast for the Fiscal year 2025. The new revenue projection ranges from $2.32 billion to $2.355 billion, an increase from the initial guidance of $2.225 billion to $2.3 billion. This updated forecast exceeds the market consensus of $2.29 billion.
Strong Price Momentum
The stock has been on an extended upward trajectory, climbing over 244% in the past three years. It trades at the high end of its 52-week price range of $54.81 – $120.60 and demonstrates ongoing positive price momentum as it trades above major moving averages. A forward P/E of 18.55x is in line with peers and the broader Consumer Discretionary sector, with an average forward P/E of 19.64x.
Analysts following the company have been constructive on LRN stock. For instance, Canaccord analyst Jason Tilchen recently reiterated a Buy rating while raising the price target on the shares to $130 (from $100), noting recent net enrollment nearly tripled expectations, with anticipation that the Trump administration could further expand school choice.
Stride is rated a Moderate Buy overall, based on the recent recommendations of three analysts. The average price target for LRN stock is $124.67, which represents a potential downside of -4.10% from current levels.
Bottom Line on LRN
Stride continues to exceed expectations by delivering impressive revenue, operating income, and net income for the second fiscal quarter. This success, driven by a significant increase in enrollments, especially in Middle and High School programs, has led the company to raise its revenue outlook for Q3 and FY25. The positive price momentum, favorable analytics, and increasing market demand position Stride as a promising option for investors interested in education stocks and the burgeoning homeschooling trend.
