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Online education platform Stride reported solid first-quarter earnings figures on Tuesday.
However, the company announced it experienced major system implementation issues, causing it to miss at least 10,000 new enrollments.
These issues sparked a dramatic sell-off of the stock as the market worried about the potential for customer dissatisfaction and slower growth.
Shares of leading online education platform Stride (NYSE: LRN) are down almost 49% as of 10 a.m. ET on Wednesday, according to data provided by S&P Global Market Intelligence.
The learning technology company reported first-quarter earnings yesterday and saw enrollments, revenue, and adjusted earnings per share rise by 11%, 13%, and 39%, respectively.
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However, Stride guided for 2026 sales growth of only 5% after the company experienced major issues implementing an upgraded platform over the summer.
According to management, these disruptions caused Stride to miss between 10,000 and 15,000 enrollments -- a hefty total, considering the company's total enrollment is currently 247,700.
This disruption is a major (hopefully temporary) black eye for a company that emphasizes the ease of use for its products with learners, prompting the market to take a cautious stance on the stock.
Following annualized sales growth of 19% over the last five years, Stride wanted to upgrade its platform to meet its burgeoning scale, but it appears the implementation went awry.
Speaking to the disruptions, CEO James Rhyu explained:
The implementations did not go as smoothly as we anticipated. We are actively engaged with our vendors to improve the situation. We heard from our customers that their engagement with these platforms detracted from their overall experience. This poor customer experience has resulted in some higher withdrawal and lower conversion rates than we expected.
Image source: Getty Images.
Management stated Stride will fix this upgrade within a year and that demand remains strong. That said, it gives competitors a great chance to whittle away at the company's leadership position.
Stride now trades at just 13 times earnings, so I'd argue it could be a great turnaround stock if management can rebuild trust with its customers.
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Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Stride. The Motley Fool has a disclosure policy.
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