On Thursday, BMO Capital Markets increased its stock price target on Stride Inc. (NYSE:LRN) to $88 from $84, while keeping an Outperform rating on the stock. The adjustment follows Stride's announcement of a successful first quarter for fiscal year 2025, which featured record-high enrollments.
Stride's management has highlighted robust demand across its General Education and Career Learning segments. The company's initial guidance for fiscal year 2025 has surpassed previous consensus expectations, alleviating concerns sparked by a recent short report.
During the earnings call, there was a significant focus on the potential decline in ESSER funds, which are part of federal stimulus funding. However, Stride's management anticipates that both revenue and enrollment numbers will remain relatively stable, with a slight potential decrease for the current year.
In response to these developments, BMO Capital has revised its financial estimates for Stride, leading to the increased price target. The firm's new target reflects confidence in Stride's performance and the company's ability to sustain growth despite the anticipated reduction in federal funding.
Stride Inc., which specializes in providing online education, has been navigating the challenges and opportunities presented by the evolving educational landscape, particularly in the context of the pandemic and subsequent recovery period. The company's strong first-quarter results and optimistic guidance suggest a positive outlook for the near future.
In other recent news, Stride, Inc. has marked its 25th anniversary with a record-breaking first-quarter fiscal year 2025 earnings call. The company reported a surge in enrollments to over 222,000, a substantial 18.5% increase from the previous year. This growth coincided with a 15% increase in revenue to $551.1 million and a 295% jump in adjusted operating income to $58.4 million.
The company also provided financial guidance for fiscal 2025, projecting revenue between $2.225 billion and $2.3 billion and adjusted operating income of $395 million to $425 million. While the loss of ESSER funding presents a challenge, Stride, Inc. remains optimistic about achieving its fiscal 2028 targets, expecting continued enrollment growth and improved gross margins.
In other developments, the company reported over 30% growth in Career Learning revenue to $198.9 million and expressed confidence in adding new programs to meet customer demand.
Despite the uncertainty surrounding expansion into new states by 2025-2026, Stride, Inc. is exploring opportunities beyond core managed programs to facilitate expansion. These are among the latest developments for the company.
InvestingPro Insights
Stride Inc.'s recent performance aligns with several key metrics and insights from InvestingPro. The company's stock is trading near its 52-week high, with a significant return of 101.6% over the last year. This impressive performance is reflected in InvestingPro Tips, which highlight Stride's strong returns over various timeframes, including the last week, three months, and five years.
The company's financial health appears robust, with InvestingPro Data showing a revenue growth of 11.55% in the last twelve months and an EBITDA growth of 29.66%. These figures support BMO Capital's optimistic outlook and increased price target.
Moreover, Stride's P/E ratio of 11.72 suggests the stock may be undervalued relative to its earnings potential, which is consistent with the InvestingPro Tip indicating that the company is trading at a low P/E ratio relative to near-term earnings growth.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips on Stride Inc., providing a deeper understanding of the company's financial position and market performance.
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