Stride Stock Tumbles 9% in Past Month: Should You Buy the Dip or Wait?

Stride, Inc.’s LRN share price performance has trended downward in the past month to 9.4%, underperforming the Zacks Schools industry, the broader Zacks Consumer Discretionary sector and the S&P 500. The detailed price performance can be studied from the chart below.Image Source: Zacks Investment ResearchIn May 2025, Gallup-McKinley County Schools (“GMCS”) officially announced the termination of its partnership with Stride, which had been initiated back in 2020 to provide virtual K-12 education programs, taking effect on June 30, 2025. This announcement took a toll on Stride’s market value amid an uncertain macro scenario with tariff concerns and inflationary pressures already hammering the nail.Owing to the adverse impacts of this news, along with the firm-specific and market headwinds, LRN also lagged behind a few of the other market players, including American Public Education, Inc. APEI, Adtalem Global Education Inc. ATGE and Strategic Education, Inc. STRA during the past month. During the said time frame, shares of American Public have inched up 0.7%, but those of Adtalem and Strategic Education have lost 8.6% and 8.8%, respectively.However, amid all these internal and external uncertainties, Stride is witnessing meaningful gains from the demand patterns shift of students and parents toward tech-based alternatives and career-focused programs. With the favorable demand trends, its diversified service and product offerings, especially through online platforms, are expected to boost its near and long-term revenue visibility and profitability.Headwinds Plaguing StrideCompany-Specific Challenges: Stride is susceptible to risks concerning partnerships and collaborations as its business directly depends on contracts with school districts, state agencies and educational institutions. Failure in complying with the set rules and regulations of the partners is likely to result in contract termination, thus limiting its growth and profitability.Recently, Stride’s long-standing partnership (since 2020) with GMCS was terminated by the latter, taking effect on June 30, 2025. GMCS claimed that Stride was unable to meet New Mexico’s legal and academic requirements, with failure to comply with student-teacher ratios being one of them. This announcement reflected adverse impacts on the company’s revenue visibility and profit structure.Macro Risks & Elevated Expenses: Stride is not an exception to facing challenges due to the ongoing macro uncertainties. Although the new tariff regime will not have any direct impact on the company, once implemented, indirect risks in the form of strained government budgets and pull-back on new contracts are likely to put pressure on its top-line growth. Moreover, LRN is facing an elevated expense structure due to increased instructional costs and services expenses alongside high selling, general and administrative (SG&A) expenses. During the first nine months of fiscal 2025, instructional costs and services and SG&A expenses increased year over year by 12.5% and 0.6%, respectively.LRN Trading at a PremiumLRN stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 16.98X, as evidenced by the chart below. The overvaluation of the stock compared with its industry peers indicates its strong potential in the market. However, this trend is making it difficult for investors to figure out a suitable entry point.Image Source: Zacks Investment ResearchEstimate Trend of LRNThe recently highlighted company-specific headwind, alongside the ongoing macro risks, is likely to have induced bearish sentiments amongst analysts. During the past 60 days, the earnings estimates for fiscal 2025 and 2026 have remained unchanged at $7.09 and $7.76 per share, respectively. However, the estimated figures for fiscal 2025 and 2026 indicate a 51.2% and 9.4% year-over-year growth rate, respectively.Image Source: Zacks Investment ResearchWill Stride be able to Overcome the Uncertainties?Online Alternatives: The online education space is continuing to evolve as digital learning becomes an increasingly mainstream option for students of all ages. This aspect is proving favorable for Stride, given its online alternative offerings across its portfolio. The company focuses on offering full-time online K-12 programs to students looking for an online alternative, while currently expanding its focus toward career learning and adult certification programs. With the ongoing regulatory reform trends in the United States education industry, the demand for online full-time K-12 programs and career education is robust, proving incremental for Stride’s long-term prospects.Thanks to these market fundamentals, LRN’s enrollment pattern is receiving an ample boost, positioning it for further growth. During the first nine months of fiscal 2025, enrollment in the General Education and Career Learning segments grew year over year by 12.8% to 137,500 students and 32% to 96,000 students, respectively, bringing the overall enrollment growth to 20%.Diversified Portfolio: Stride indulges in offering diversified and blended education programs, ranging from mainstream K-12 programs to career learning and adult certification programs. Alongside basic K-12 education, parents in the United States are currently shifting their focus to a more skill-based service for their kids. This robust demand trend for career-focused alternatives has boosted the demand for the company’s career-learning programs, hence offering elevated revenue visibility and profitability structure for the long term. This shift toward a more career-based offering is proving to be incremental for market players like American Public, Adtalem and Strategic Education, as well.For maintaining this momentum and grabbing onto possible opportunities, Stride is continuously executing strategies to offer products and services, having a favorable mix of K-12 and career learning offerings.Stable Liquidity Position: Stride is doing a remarkable job in ensuring a stable cash position while reducing its debt obligations amid macro uncertainties. Amid a favorable market backdrop, at the end of the third quarter of fiscal 2025, its cash and cash equivalents were $528.5 million, up from $500.6 million at fiscal 2024-end. As of March 31, 2025, long-term debt was $415.9 million, slightly up from $414.7 million at fiscal 2024-end. Although the debt moved up, the liquidity position is sufficient to meet it.Besides, LRN follows a balanced capital allocation approach, ensuring that its free cash is used effectively on business reinvestments and maintaining shareholder value. The business reinvestment areas include organic growth, new product and technology development, and accretive mergers and acquisitions.Stride’s ROE TrendThe company’s trailing 12-month return on equity (ROE) reflects its growth potential and focus on maintaining shareholder value. As evidenced by the chart below, Stride’s ROE is significantly better than the industry.Image Source: Zacks Investment ResearchWhat are the Thoughts on Investment?Per the above discussion, the market demand trends are moving in favor of Stride, resulting in robust enrollment growth. Besides its diversified program offerings, online alternatives and the ongoing regulatory reforms in the education market are further catalyzing the growth prospects.However, the recent partnership termination by GMCS has created a negative buzz for LRN in the market. Although this buzz is expected to subside in the long term, in the near term, it is expected to pressure its growth and profitability amid the lingering inflationary pressures and macroeconomic uncertainties in the market.Thus, by considering both sides of the coin, it will be prudent for existing investors to retain this Zacks Rank #3 (Hold) company’s shares for now, whereas new investors might want to wait for a more favorable entry point.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.One Big Gain, Every Trading DayTo help you take full advantage of this market, you’re invited to access every stock recommendation in all our private portfolios - for just $1.Zacks private portfolio services that closed 256 double and triple-digit winners in 2024 alone. That’s about one big gain every day the market was open. Of course, not all our picks are winners, but members have seen recent gains as high as +627% +1,340%, and +1,708%.Imagine how much you could profit with a steady stream of real-time picks from all our services that cover a number of strategies to suit a variety of investing and trading styles.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report American Public Education, Inc. (APEI): Free Stock Analysis Report Strategic Education Inc. (STRA): Free Stock Analysis Report Stride, Inc. (LRN): Free Stock Analysis Report Adtalem Global Education Inc. (ATGE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks