Stride Stock Hits New 52-Week High: Should You Buy, Hold or Fold?

Stride, Inc. LRN seems to be faring well in the competitive education market, notably evident by its new 52-week high on Friday. The LRN stock reached a new 52-week high of $114.71 and pulled back to $111.13 at the end of the trading session.This for-profit education company is banking on the demand strength for its virtual and blended educational programs, reflected in its enrollment growth along with the ongoing optimism surrounding the U.S. education market regarding the regulatory reforms to be undertaken under President Trump’s administration. These tailwinds are backing up Stride in meeting its 2028 targets along with ensuring a balanced capital allocation that evaluates options to return capital to the shareholders.The company’s shares have notably outpaced the market in the past six months. In the said time frame, the LRN stock has climbed 58.3%, outperforming the Zacks Schools industry, the Zacks Consumer Discretionary sector and the S&P 500 Index. The detailed price performance is shown in the chart below. Image Source: Zacks Investment Research Moreover, in comparison with a few other education stocks, including Universal Technical Institute, Inc. UTI, Adtalem Global Education Inc. ATGE and American Public Education, Inc. APEI, the company’s share price performed well in the past six months. During the discussed time frame, UTI, ATGE and APEI has grown 46.1%, 22% and 4.9%, respectively.Stride’s Driving FactorsGrowing Enrollment Trend: Enrollment growth has been one of the key performance drivers of Stride. During the fiscal first quarter of 2025 (ended Sept. 30, 2024), total enrollment grew year over year by 18.5% to 222.6K, with General Education (K-12) increasing 11.3% to 130.9K and Career Learning (Middle – High School) rising 30.4% to 91.7K. This enrollment growth rate was recorded to be the highest since the pandemic’s numbers.The company’s continuous investments and opportunity searches for diversifying its learning portfolio, along with innovation, are boding well. Also, LRN’s focus on enhancing technological offerings to make learning easier and offering its customers the best products is noteworthy. These aspects are supporting the enrollment growth, given the increased demand for its offerings, and are expected to continue benefiting the company in the upcoming period.Focus on Reaching Long-Term Targets: Stride has been working on meeting its fiscal 2028 targets. Given the ongoing enrollment growth, backed by various in-house and macro aspects, it believes that it is well-positioned to achieve the fiscal year’s goals without much hassle.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, along with adjusted operating income projected to be between $415 and $585 million (with a 20% CAGR). Also, EPS is expected to be between $6.15 and $8.35, with a CAGR of 20%. With a focus on profitability and operational efficiency, the company is positioned to leverage organic growth and acquisitions, establishing itself as a leader in the growing virtual education market.Balanced Capital Allocation: Stride’s capital allocation priorities are centered around driving sustainable growth and creating long-term shareholder value. Effectively utilizing its free cash flow between business activities and rewarding shareholders marks its focus on ensuring a balanced allocation of capital that benefits every stakeholder in the long term. Through various organic and inorganic activities, LRN maintains the growth trend of its business, which directly leverages its cash flow and enables it to maintain a healthy balance sheet.As of Sept. 30, 2024, LRN had cash, cash equivalents & marketable securities of $539.4 million, with a long-term debt of $415.1 million. The numbers suggest that the company’s liquidity position is feasible to pay off its debt obligations.LRN Stock Trades Above 50 & 200-Day SMAsTechnical indicators suggest a continued strong performance for Stride. From the graphical representation given below, it can be observed that LRN stock is riding above both the 50-day simple moving average (SMA) and 200-day SMA, signaling a bullish trend. The technical strength underscores positive market sentiment and confidence in LRN’s financial health and prospects.50 & 200-Day Moving Average Image Source: Zacks Investment Research LRN Trading at a DiscountStride is currently trading at a discount compared with the industry peers on a forward 12-month price-to-earnings (P/E) ratio basis. The discounted valuation indicates that despite the recent stock price increase in the past six months compared with its peers, it remains an attractive option for investors looking for a suitable entry point. Image Source: Zacks Investment Research Estimate Trend Revision of LRNThe Zacks Consensus Estimate for Stride’s fiscal 2025 earnings per share (EPS) has trended downward over the past 30 days. However, the estimated figure indicates 41.6% growth from the year-ago quarter’s figure. Furthermore, the second fiscal quarter’s earnings estimates also indicate 27.9% year-over-year growth despite remaining unchanged over the past 60 days.EPS Trend Image Source: Zacks Investment Research What Might Hinder the Momentum of LRN Stock?Stride’s growth prospects are expected to be marred by increasing costs and expenses given the persisting inflationary environment and a slowdown in its software development product offerings. The Adult Learning section’s revenues, under its Career Learning segment, are expected to see some softness due to reduced enrollment growth attributable to a delay in software development products.Furthermore, increased costs and expenses due to higher instructional costs and services, along with interest expenses, are expected to hinder performance for some time. During the first quarter of fiscal 2025, instructional costs and services increased to $335.2 million from $307.3 million, year over year.Should You Consider LRN Stock: Yay or Nay?Per the discussion above, Stride’s performance is benefiting from the strong demand for its product offerings and virtual learning platform leading to robust growth in enrollment. Furthermore, its effective utilization of the free cash flow, along with its ability to meet up its pre-set fiscal 2028 goals without much hassle, is noteworthy. Investors might want to weigh on these tailwinds when making any decisions concerning LRN stock.However, a persisting inflationary scenario is indeed pushing the costs and expenses of the company upward, which is expected to hurt its margins to some extent. Nonetheless, the tailwinds mentioned above, along with Stride’s continuous focus on ensuring operational efficiency, are likely to boost its performance in the upcoming period.Based on the overall discussion and the trends of technical indicators, it is prudent for existing investors to hold on to this Zacks Rank #3 (Hold) company’s shares for now, whereas new investors might want to wait for a more favorable entry point.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report American Public Education, Inc. (APEI): Free Stock Analysis Report Universal Technical Institute Inc (UTI): Free Stock Analysis Report Stride, Inc. (LRN): Free Stock Analysis Report Adtalem Global Education Inc. (ATGE): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks