Canaccord raises Stride stock target to $145, maintains Buy

On Tuesday, Canaccord Genuity analyst Jason Tichen updated the price target on Stride Inc. (NYSE:LRN) shares, raising it to $145 from the previous $135, while reiterating a Buy rating for the company. Tichen’s decision follows recent investor meetings with Stride’s CFO Donna Blackman and VP of Corporate Development Tim Casey, which took place last week. During these meetings, Stride’s management team discussed the company’s enrollment momentum and the impact of education policy proposals emerging from Washington. According to InvestingPro data, Stride maintains a robust financial health score of "GREAT," with a market capitalization of $5.16 billion and impressive revenue growth of 13% over the last twelve months.

Stride has been experiencing a surge in demand for online schools post-pandemic, which has been met with robust enrollment growth. The company’s marketing improvements have been key to capturing a larger market share. These efforts, combined with more efficient student acquisition strategies, have led to strong results in the first half of fiscal year 2025. The company’s strong execution is reflected in its financial metrics, with InvestingPro data showing a healthy current ratio of 6.02 and strong cash flows that adequately cover interest payments. Despite the potential changes to the Department of Education in Washington, Stride’s reliance on federal funding is minimal, as it constitutes less than 5% of the company’s total revenue, suggesting that such changes would likely not have a significant effect on Stride’s business.

The stock has seen a notable increase, rising 97% over the past year, despite a 14% decline in the past week. Trading at a P/E ratio of 19.03, Stride shows strong value characteristics relative to its growth potential. Tichen suggests that while some near-term weakness in Stride’s shares is possible due to a current lack of material catalysts until the company provides its fiscal year 2026 guidance in October, any further decline in stock price could present a valuable buying opportunity for investors. This perspective is based on Stride’s continued operational improvements and reasonable market expectations. For deeper insights into Stride’s valuation and growth prospects, investors can access comprehensive analysis through InvestingPro’s detailed research reports, which cover over 1,400 US stocks.

Tichen also indicated that Stride has the potential to exceed estimates if it can successfully develop a standalone application funnel for its Career Learning offerings over time. This development could add to the company’s growth trajectory and provide additional value to its shareholders.

In other recent news, Stride Inc. reported its Q2 2024 earnings, significantly surpassing analyst expectations with earnings per share of $2.03 against the forecasted $1.92, and revenue of $587.2 million, exceeding the anticipated $562.39 million. This performance marks a 16% revenue growth year-over-year and highlights Stride’s strong demand for alternative education solutions. Following the earnings announcement, BMO Capital Markets raised its price target for Stride to $134 from $122, maintaining an Outperform rating due to the company’s consistent outperformance and market share gains in the General Education and Career Learning segments. Despite recent concerns over the potential shutdown of the Department of Education, Morgan Stanley (NYSE:MS) maintained its ’Equalweight’ rating and a $117 price target, citing the company’s limited exposure to federal funding and the low likelihood of the department’s dissolution. Stride’s enrollment reached a record 230,000 students, reflecting a 19.4% increase from the previous year, which supports the company’s robust growth trajectory. The firm’s management has raised the full-year revenue guidance to a range of $2.32-$2.355 billion, emphasizing continued enrollment growth and platform improvements. Stride’s operational efficiency and strategic initiatives have been key components in its recent achievements, as noted by analysts. The company’s strong quarterly results and positive market reaction underscore its solid positioning in the education sector.

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