Stride Stock Soars 49% YTD: Should Investors Buy Now or Wait?

Stride, Inc.’s LRN stock performance has been impressive in the year-to-date period, with a 48.7% rise compared with the Zacks Schools industry’s 10.3% growth. It has also outperformed the Zacks Consumer Discretionary sector and the S&P 500 in the same time frame. The detailed price performance is shown in the chart below.

The market demand for career education and an online program alternative fosters the company’s prospects in the near and long term. This solid trend is visible from the record enrollment growth trends, especially for the Career Learning segment. Apart from this market catalyst, Stride’s in-house initiatives, like offering virtual and blended educational programs, bode well.

Year to date, LRN has also outpaced a few of the renowned industry players like Universal Technical Institute, Inc. UTI, Adtalem Global Education Inc. ATGE and American Public Education, Inc. APEI. During the said time frame, Universal Technical, Adtalem and American Public have jumped 34.6%, 48.3% and 29.1%, respectively.

What Factors are Aiding Stride’s Momentum?

Strength in Enrollment: The market scenario for education in the United States is inclining more toward online program alternatives and a focus on career education. These trends are in favor of Stride, supported by its diversified product offerings. During the first nine months of fiscal 2025, the company witnessed enrollment growth across its General Education and Career Learning segments. The enrollment in General Education and Career Learning segments grew year over year by 12.8% to 137,500 students and 32% to 96,000 students, respectively, bringing the overall enrollment growth to 20%.

This uptick resulted in 16.3% year-over-year growth in the total revenues for Stride during the first nine months of fiscal 2025 to $1.75 billion. Its strategic investments focusing on school-as-a-service offerings, a personalized learning model and improving user experience of its products position it well to witness such trends in the upcoming period, despite the ongoing macro risks.

Upbeat Fiscal 2025 View: After moving through the first nine months of fiscal 2025, Stride again increased its fiscal 2025 outlook, given its upbeat performance in its recently announced quarterly earnings.

The company raised its fiscal 2025 revenue guidance between $2.37 billion and $2.385 billion from the $$2.32 billion to $2.355 billion range expected earlier. The new view indicates a rise between 16.2% and 16.9% year over year from $2.04 billion reported in fiscal 2024. The adjusted operating income is now expected to be between $455 million and $465 million, which is up from the previously expected range of $430-$450 million. This raised guidance compares with $293.9 million reported in fiscal 2024, suggesting 54.8-58.2% year-over-year growth.

Focus on Achieving 2028 Targets: Stride is currently focusing on meeting its fiscal 2028 targets, favored by the ongoing regulatory reform trends and its strategic business initiatives. Under the fiscal 2028 targets, LRN expects revenues to grow in the range of $2.70-$3.30 billion, reflecting a 10% compound annual growth rate (CAGR) from fiscal 2023. Adjusted operating income is projected to be between $415 million and $585 million (with a 20% CAGR). Also, earnings per share (EPS) are expected to be between $6.15 and $8.35, with a CAGR of 20%.

The new reforms in the education industry under President Trump’s administration are likely to lead to fewer regulations. This, coupled with Stride’s diversified blend of educational programs, focus on capitalizing on advanced software and implementing curriculum development, positions it well to achieve the fiscal year’s goals without much hassle.

Estimate Trend Favors LRN

The upbeat fiscal 2025 view, coupled with the favorable market fundamentals, is likely to have boosted the analysts’ expectations, leading to an upward revision of fiscal 2025 and 2026 earnings estimates in the past 30 days. As visible from the chart below, the earnings estimates for fiscal 2025 indicate a 51.2% year-over-year growth rate, with fiscal 2026 suggesting a 9.4% rise.

EPS Trend

LRN’s ROE Trend

The company’s trailing 12-month return on equity (ROE) reflects its growth potential and focus on maintaining shareholder value. As evidenced by the chart below, LRN’s ROE is significantly better than the industry.

LRN Trading at a Premium

The company is currently trading at a premium compared to its industry peers on a forward 12-month price-to-earnings (P/E) ratio basis. The overvaluation of LRN stock compared with its industry peers indicates its strong potential in the market, given the favorable trends backing it up.

What are the Thoughts on Investment?

Per the above discussion, the market demand trends are moving in favor of Stride’s offerings, resulting in robust enrollment growth. Besides its in-house strategies, including cost-saving initiatives, shareholder value and the focus on achieving the long-term business targets, are positioning it well to navigate through the market uncertainties and attain profitability in the upcoming period.

The optimistic environment is reflected in the upward earnings estimate revision for the ongoing and the upcoming fiscal years. Investors must consider the tailwinds mentioned above and the patterns of the technical indicators while deciding on any action taken in favor of LRN stock.

Based on the overall discussion and the favorable trends of technical indicators, investors can consider adding this Zacks Rank #1 (Strong Buy) stock to their portfolio now. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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