Nelnet, Inc. (NNI): A Bull Case Theory

We came across a bullish thesis on Nelnet, Inc. (NNI) on Chit Chat Stocks’ Substack. In this article, we will summarize the bulls’ thesis on NNI. Nelnet, Inc. (NNI)’s share was trading at $116.53 as of 28^th May. NNI’s trailing and forward P/E were 21.99 and 15.75 respectively according to Yahoo Finance.

Nelnet (NNI) remains a compelling, undervalued long-term investment, with a total return of 167% over the last five years and a market cap of $4.1 billion. A major catalyst this quarter was the divestiture of part of its stake in Allo Communications. Nelnet sold its entire preferred equity interest and reduced its common equity ownership from 45% to 26%, netting approximately $410 million in cash and recognizing a $175 million pre-tax gain.

This single transaction brings cash equivalent to 10% of its market cap onto the balance sheet while still retaining a valuable 26% equity stake in Allo. Meanwhile, Nelnet’s education software and payments division—its most profitable segment—has experienced slower growth recently, though it still generated $117 million in EBIT. Despite the moderation, the business remains highly cash-generative and arguably worth at least $2 billion. Importantly, Nelnet may have reignited growth with the acquisition of Next Gen Web Solutions, which serves 20 million higher-education students and complements Nelnet’s existing focus on private K–12.

While financials for the acquisition are not yet disclosed, confidence in management’s discipline on valuation remains high. On the lending side, Nelnet’s student loan portfolio continues to shrink but still carries $1 billion in undiscounted cash flow, with 25% expected this year. Simultaneously, Nelnet is building its future through Nelnet Bank and unsecured lending. Net interest income after loan losses reached $25 million in the past year, and tracking its continued growth is key. Altogether, Nelnet’s sum-of-the-parts value, cash generation, and hidden balance sheet assets support the case for significant undervaluation.

Previously, we have covered Nelnet, Inc. (NNI) in April 2025, wherein we summarized a bullish thesis by Aaron Edelheit on Substack. The author highlighted Nelnet’s $410 million cash gain from its Allo investment and its disciplined, Berkshire-like strategy, arguing the stock was deeply undervalued with intrinsic value near $200 per share. Since our last coverage, the stock is up 9% as of 28^th May.

Nelnet, Inc. (NNI) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 15 hedge fund portfolios held NNI at the end of the first quarter which was 18 in the previous quarter. While we acknowledge the risk and potential of NNI 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 timeframe. If you are looking for an AI stock that is more promising than NNI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article was originally published at Insider Monkey.