Photo Illustration by Thomas Fuller/SOPA Images/LightRocket via Getty Images
SOPA Images/LightRocket via Getty Images
Stride Inc. (NYSE: LRN) has experienced a decline of nearly half its market value within days after it released its most recent quarterly results—an incredible drop for a company that actually surpassed earnings expectations. The online education company disclosed an adjusted EPS of $1.52, an increase from $1.26 a year earlier, along with revenue of $620.9 million, marking an almost 13% year-over-year growth, propelled by robust expansion in its Career Learning segment. However, investors were unsettled when Stride’s leadership forecasted full-year revenue between $2.48 billion and $2.55 billion, significantly lower than Wall Street’s anticipated figure of approximately $2.67 billion. The company also recognized operational missteps related to the rollout of new technologies, which it stated may have led to a loss of 10,000–15,000 student enrollments—a critical shortfall for a business reliant on scale and retention. Also see: Stride Stock Drops 54% In A Day, Time To Buy The Stock?
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This revised guidance suggests revenue growth is set to decline from approximately 18% last year down to just 9–10% this year—a significant slowdown that has caused distress among growth investors. Despite an 11% increase in overall enrollment and Career Learning continuing to grow at more than 30%, the market is now skeptical about Stride’s ability to maintain profitability if growth momentum wanes. Prior improvements in margins were promising—adjusted operating income surged by 59% last year and EBITDA climbed by 46%—but those advancements could diminish if student retention and technology costs continue to weigh heavily.
At the present rate, Stride is trading at around 12–13× forward earnings, which is significantly lower than peers like Chegg or Coursera, who command valuations greater than 20×. This low valuation reflects doubt—but it also indicates opportunity. If management can stabilize enrollments and achieve its long-term goal of 10% annual revenue growth and 20% profit growth, the current downturn may eventually be perceived as capitulation rather than a fundamental decline. For the time being, however, investors will need to observe clear signs of execution before assuming that the bottom has been reached.
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