Top 5 EdTech Stocks: The Road to Legitimate and Effective Online Education

Empowering over 100 million people to learn a second language online.

• Duolingo is a mobile app that enables people around the world to learn languages in a fun and engaging way. The app is listed as an editor’s choice in both the play store with 100m+ downloads, and the app store where it is #2 in the education category.
• Nearly 50 million monthly active users engage with Duolingo since Q2 2022. The company made its IPO in 2021, and management has set a goal to make learning available and fulfilling via their technology.
• The total language market is estimated to be $60b per year, and is still mostly taught offline. However, management expects to see a shift to online learning in the future.
• The company has recently re-entered the Chinese market, which is the largest English language learning opportunity. Although the Chinese market present difficulty in monetization and the possibility of change in the current political climate, if Duolingo is able to penetrate deep into the Chinese market, it opens up opportunity for a large increase in paying subscribers.
• With 3.3 million paying subscribers, the company has made $306 million in the last 12 months, and expects around $365 million in revenue for 2023.
• The company will be focused on language in the next 3 to 5 years, but is testing their Math app as a new opportunity. The new app is estimated to be put in beta sometime in 2022.
• The company is placing mini games to support learning based on in-app purchases, and has rolled out a standardized English test which is formally acknowledged by an increasing number of universities.
• Given the company’s increasing presence in core markets and opportunities for further revenue generation through monetizing their upcoming Math app, the company should continue to enjoy comfortable growth over the coming years, solidifying its place as an educational institution.

Bringing quality remote learning opportunities to prepare students for future success.

• Stride offers online and homeschooling learning solutions, including: K-12 & career prep, Early career & training with galvanize, ATech Elevator, MedCerts; Job placement & recruitment with Tallo.
• The online programs give Stride some cost advantage compared to traditional education methods as 75% of employees work remotely, transportation costs are eliminated, and the schools have a recycling/refurbishment program for class resources.
• The pandemic bumped the total number of enrolled students from 124k in 2020 to 195k in 2021. The number of students is currently normalizing at 190k, but the company can build on the expanded momentum from 2020. The online classes have also demonstrated a set of conveniences for which parents have been made more aware of, and growth tailwinds may continue.
• The company estimates its addressable U.S. market at $100 billion, of which it captured $1.69b or 1.7% in the last 12 months. The addressable market consists of $65b in online and blended programs for middle to high school students, as well as $35 billion in K-12, instructional materials, and additional development.
• For 2025, the company expects around $2.05b in revenue and around $300m in adjusted operating income, with the highest growth contributor being career learning, instead of general education.
• Acceptance of remote working is on the rise and Stride could stand to benefit. If people choose to live in rural areas as they’re afforded the option to by their working circumstances, businesses like Stride help provide quality education services where traditional brick and motar instutitions are unavailable or inadequate.

Agile education options in a changing digital landscape.

• Udemy acts as an education marketplace offering free and paid online courses with low barriers for content creation. This approach fosters competition among course creators and a benevolent feedback cycle that props up the better courses for learners. The platform has high traffic, partly due to incentivizing self promotion from course authors.
• Udemy focuses on marketable skills that help people get a job or earn an income, which in turn aims to justify the service price. Part of the value proposition is that it offers prep courses for obtaining more mainstream certificates.
• Where Udemy has the advantage over traditional educators is in its ability to be agile. Computer science and web development evolve rapidly as programming languages are updated and traditional educators struggle to alter curriculums to keep up with the changes. Udemy’s ‘marketplace’ approach allows for the most relevant courses to quickly rise to the top, meaning users always have access to current and high quality courses compared to other educators which may be limited to 6 monthly curriculum updates at best.
• Total revenue is projected to come close to US$1 billion after 2025, with an annual revenue growth rate of 18.9%.
• Based on 2021 data from Arizton, Udemy estimates a market opportunity in online learning of US$223 billion, consisting of a global corporate opportunity of US$71 billion and a global consumer opportunity of US$152 billion; indicating there being plenty of opportunity for continued growth if Udemy positions itself well.

Online degrees from the top education institutions in the world.

• Coursera focuses on offering professional certificates by large enterprise partners and established educational institutions.
• Seeking top quality education often comes at the cost of having to quit your job and move to another city, but Coursera aims to change all that by offering the same high quality education but from a remote learning perspective.
• Alongside its free and paid courses, Coursera offers online degrees at the bachelors and master levels. Part of the courses can be exchanged in return for credits from educational institutions. Students can also participate in guided exercises that aim to teach them how to do a particular task.
• Coursera aims to be a differentiator in the market when it comes to pricing. The online learning environment it provides is cost effective and allows Coursera to offer the same level of tuition at a price point well below most on-campus degree programs. This should prove to be a huge draw for Coursera looking to increase user count as the economic barrier to accessing high quality education lowers, increasing the potential market share.
• It has a segment for training business clients, where the main selling points are less training costs and more productivity for businesses.
• Coursera is incorporated as a certified “B” corp, and investors should make sure to assess management’s path to profitability as part of their investment analysis.
• While revenue is expected to grow by 19.7% annually, the company may be a bit more risky due to having the lowest -35.7% net margin relative to the mentioned peers.

Delivering world class education to millions across the globe.

• 2U is an education platform centered around their EDX brand. The company centers around offering courses and degrees from highly recognised institutions such as: MIT, Harvard, Berkeley etc.
• The company has 44+ million registered worldwide learners across more than 2800 courses.
• As part of their 2023 strategy, the company aims to cut down the marketing spend to 37% of revenues, down from 56% in 2019. It seems that management has embarked on a general cost-cutting path in order to drive profitability, as the company has accumulated a $714 million net debt balance.
• The company is not expected to grow much, and already has a revenue level of $970 million. Given its new strategy, the platform is expected to reduce its net loss to $-115.7 million by 2024.
• The company also has a portfolio of enterprise e-learning products targeting regular employee training programs for businesses.