LRN: Future Enrollment Will Recover As Platform Issues And Legal Headwinds Ease

Analysts have trimmed their price target on Stride to $125 from $175 and to $108 from $164, reflecting mixed recent results and concerns around a troubled platform rollout and a softer than expected fiscal 2026 outlook.

Analyst Commentary

Recent Street research reflects a more cautious stance on Stride, with price targets reset lower but views remaining divided on the company’s execution risk and long term growth potential.

Bullish Takeaways

• Bullish analysts maintain positive ratings despite the reduced price targets. This suggests they still see upside from current levels as valuation has de risked.
• Mixed quarterly results are viewed constructively. Revenue and profitability modestly exceeded consensus even as enrollment lagged expectations, which supports the resilience of the business model.
• Strong application volumes during the enrollment period are cited as evidence of underlying demand for Stride’s offerings. This provides a foundation for future growth once platform issues are resolved.
• The ongoing upgrade of learning and technology platforms is seen as a strategic investment. If successfully executed, it could enhance scalability and margins over the medium term.

Bearish Takeaways

• Bearish analysts argue that the significantly reduced fiscal 2026 outlook signals elevated execution risk and a weaker near term growth trajectory than previously anticipated.
• The troubled platform rollout, which led to higher than expected student withdrawals, raises concerns about management’s ability to implement major technology transitions without disrupting operations.
• Restrictions on in year enrollment growth, introduced to mitigate further platform related issues, are viewed as a headwind for top line acceleration and limit potential upside to consensus estimates.
• With fall enrollments serving as the key earnings catalyst, some see a lack of near term triggers for a rerating. This implies the stock could trade in a holding pattern until at least the next enrollment cycle.

What's in the News

• Scott+Scott Attorneys at Law LLP has filed a securities class action in the Eastern District of Virginia alleging Stride misled investors on enrollment, staffing, compliance, and student outcomes, seeking damages for shareholders who bought during the alleged misrepresentation period (Key Developments).
• The Gallup McKinley County Schools Board of Education has sued Stride in New Mexico, accusing the company of fraud, deceptive practices, retaining ghost students for funding, overloading teachers, and ignoring compliance and special education requirements, and is seeking compensatory, punitive, and triple damages plus restitution of taxpayer funds (Key Developments).
• Stride's Board has authorized a new share repurchase plan, allowing the company to buy back up to $500 million of its stock through October 31, 2026. This is described as signaling management's confidence in long term value despite legal and operational headwinds (Key Developments).
• The company issued updated guidance for the second quarter and full fiscal year 2026, projecting quarterly revenue of $620 million to $640 million and full year revenue of $2.48 billion to $2.555 billion. Management characterized this as reinforcing a slower but still growing topline trajectory (Key Developments).

Valuation Changes

• Fair Value Estimate remains unchanged at approximately $115.50, indicating no material shift in intrinsic value despite updated assumptions.
• Discount Rate has risen slightly from about 7.44% to 7.50%, reflecting a modest increase in the required return for Stride’s equity.
• Revenue Growth Assumption is essentially unchanged, moving fractionally from roughly 4.23% to 4.23%, signaling a stable growth outlook.
• Net Profit Margin Assumption is effectively flat, edging only marginally higher from about 16.06% to 16.06% in future projections.
• Future P/E Multiple has increased very slightly from approximately 14.01x to 14.03x, implying only a minimal adjustment to valuation multiples.