Stride, Inc. (LRN): A Deep Value Play in Online Education After a Sharp Sell-Off

Shares of Stride, Inc. (NYSE: LRN), a major player in the virtual K-12 education sector, have faced significant headwinds in recent months. The stock, trading around $84.60 in late January, now sits at a valuation that some analysts argue fails to reflect the company's underlying strengths and market position.

The company provides a comprehensive online education platform, serving approximately 250,000 students across nearly 100 schools, primarily in states with supportive school choice policies. Its revenue model is notably resilient, as payments are largely made by school districts rather than individual families.

The recent sell-off was triggered by a self-inflicted wound: a botched rollout of a new learning management system disrupted the critical August enrollment period. This operational misstep cost the company an estimated 10,000 to 15,000 incremental students and led to a guidance cut. However, despite this setback, enrollment and earnings before interest and taxes (EBIT) still managed to grow approximately 5% year-over-year. Management reports that the technical issues are largely resolved, with a redesigned parent portal scheduled for 2026.

Compounding the pressure were regulatory headlines concerning isolated issues at a handful of schools in Texas and New Mexico—issues the company states were minor and have since been addressed internally. Analysts note that Stride's diversified network and district-funded model insulate it from the systemic risks that plagued the for-profit college industry.

The valuation disconnect is striking. The stock now trades at roughly 4 times forward EBIT, a steep discount to its historical average near 15x. With the company actively repurchasing shares—targeting nearly 20% of the float—and sitting on a net cash position of about $10 per share, the risk-reward profile appears compelling to value-oriented investors. The core business continues to generate strong incremental returns, with roughly $500 million in EBIT on only $600 million of invested capital.

Market Voices:

• David Chen, Portfolio Manager at Horizon Capital: "This is a classic case of the market over-penalizing a company for a transient, operational issue. The long-term thesis for flexible, technology-enabled education remains intact, and Stride's financials are fundamentally solid. The buyback at these levels is highly accretive."
• Marcus Wright, Independent Education Analyst: "The guidance cut was a clear failure of execution, and it rightly shook confidence. However, to ignore the 5% underlying growth and the $10 per share in cash is to miss the forest for the trees. At 4x EBIT, you're essentially getting the platform for free."
• Rebecca Shaw, Editor at 'The Skeptical Investor': "Are we seriously ignoring the regulatory clouds and the enrollment stumble? This isn't just 'noise.' It's a sign of potential cracks in the model. The sector is politically sensitive, and growth has demonstrably slowed. Calling this a deep value play feels like trying to catch a falling knife."
• Arjun Patel, Retail Investor & Former Educator: "As someone who's seen the platform in action, the demand from families for quality, flexible options is real and growing. The tech rollout was a fumble, but the game isn't over. The valuation seems to price in a permanent decline, which I just don't see in the communities Stride serves."

While Stride did not rank among the most popular hedge fund holdings in the last quarter, 39 funds maintained positions. The debate now centers on whether the current price represents a cyclical low for a durable business or the beginning of a more protracted challenge.