Canaccord raises Stride stock target to $130, maintains buy

On Monday, Canaccord Genuity updated its outlook on Stride Inc. (NYSE:LRN), increasing the price target to $130 from the previous $100, while reaffirming a Buy rating on the company's shares. The optimism appears well-founded, as InvestingPro data shows Stride has delivered an impressive 98% return over the past year, with revenue growing at 11.55%. Stride Inc., known for its education technology services, has reported significant net enrollment growth, surpassing analyst expectations for the 2024-2025 academic year.

According to Canaccord Genuity's analyst, the enrollment surge is attributed to a combination of factors including better word-of-mouth referrals, more effective marketing strategies, increased organic traffic to Stride's website, and strong results from search engine marketing. These elements have contributed to a robust start for the company in the current school year, reflected in its strong financial health with a current ratio of 5.6 and moderate debt levels.

For the second fiscal quarter and the remainder of the fiscal year 2025, Stride anticipates revenue growth to be primarily driven by the increase in enrollments. However, revenue per enrollment is expected to remain relatively stable or decrease slightly. This projection is based on the end of ESSER funding, which is anticipated to be balanced by a generally favorable state-level funding landscape for education. InvestingPro subscribers can access 15+ additional exclusive insights about Stride's financial health and growth prospects, along with detailed analysis in the Pro Research Report.

Stride has also expanded its services with the introduction of K12 Tutoring. This new offering utilizes the company's existing technology platform, content, marketing capabilities, and billing systems to provide online tutoring services by state-certified teachers. This initiative is part of Stride's strategy to leverage its resources for new educational services, building on its strong market position and healthy profit margins of 38.2%.

Investors and analysts are looking forward to the upcoming earnings call where management is expected to share insights on the early performance of the K12 Tutoring service. Additionally, there is interest in understanding how the policies of the Trump administration might influence the expansion of school choice and the overall education funding environment.

In other recent news, Stride Inc. has reported several significant developments. The company's first quarter for fiscal year 2025 witnessed a record-breaking surge in enrollments to over 222,000, marking an 18.5% increase from the previous year. This growth was accompanied by a 15% rise in revenue, reaching $551.1 million, and an impressive 295% increase in adjusted operating income to $58.4 million.

In response to these positive financial outcomes, BMO Capital Markets upgraded its stock price target for Stride Inc. to $88 from $84, maintaining an Outperform rating. The company also celebrated its 25th anniversary and reported a 30% growth in Career Learning revenue to $198.9 million.

Furthermore, at its annual stockholders meeting, shareholders elected all eight nominees for the Board of Directors and ratified KPMG LLP as Stride's independent registered public accounting firm for the fiscal year ending June 30, 2025. An advisory vote on the compensation of named executive officers was also approved, indicating shareholder support for the company's executive compensation policies.

Looking ahead, Stride Inc. is projecting revenue between $2.225 billion and $2.3 billion and adjusted operating income of $395 million to $425 million for fiscal 2025. While potential challenges lie ahead, such as a potential decline in ESSER funds, management remains optimistic about achieving its fiscal 2028 targets, expecting continued enrollment growth and improved gross margins. These are the recent developments for the company.

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