Is LRN a good stock to buy? We came across a bullish thesis on Stride, Inc. on r/ValueInvesting by Key_Variety_6287. In this article, we will summarize the bulls’ thesis on LRN. Stride, Inc.’s share was trading at $98.98 as of April 20th. LRN’s trailing and forward P/E were 15.20 and 10.95 respectively according to Yahoo Finance.
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Stride, Inc., together with its subsidiaries, provides proprietary and third-party online curriculum, software systems, and educational services in the United States and internationally. LRN has seen its share price decline sharply by approximately 60% from $171, driven primarily by a temporary operational misstep and emerging litigation concerns rather than any structural deterioration in the business.
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The operational issue stemmed from a failed enrollment portal upgrade, leading to the loss of 10,000–15,000 students and forcing management to reduce growth guidance from 12% to 5%. However, underlying demand remains robust, with total enrollment still growing 11% year-over-year and the higher-value vocational segment expanding by 20%, indicating that the setback is isolated rather than systemic. Based on estimated blended revenue per student of roughly $10,000, the enrollment loss translates to about $150 million in revenue, which closely aligns with the guidance revision, reinforcing that the decline is attributable to the one-time IT failure.
Despite these challenges, Stride maintains a strong financial position with $161 million in net cash and a low debt-to-EBITDA ratio of 1.17x, effectively eliminating bankruptcy risk and providing ample flexibility. At current levels, the company trades at approximately 6x EV to pre-tax earnings and offers a compelling free cash flow yield of around 12.5%, supported by over $300 million in annual FCF.
Management has authorized a $500 million share repurchase program, which, if executed, could retire up to 15% of outstanding shares and significantly enhance shareholder returns. While litigation risk related to alleged enrollment inflation could result in potential fines, even a sizable settlement would be manageable relative to cash flows. With the enrollment system likely to be fixed and growth normalizing, Stride presents a highly attractive risk-reward profile with meaningful upside potential.
Previously, we covered a bullish thesis on Stride, Inc. (LRN) by Technical-Industry22 in October 2024, which highlighted the company’s expansion into adult career learning, strategic acquisitions, and growth in online and hybrid education models. LRN’s stock price has appreciated by approximately 53.48% since our coverage. Key_Variety_6287 shares a similar view but focuses on temporary operational setbacks, litigation risks, and upside from a $500 million share repurchase.
Stride, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 43 hedge fund portfolios held LRN at the end of the fourth quarter which was 39 in the previous quarter. While we acknowledge the risk and potential of LRN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LRN and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
