Online Education Results Surge, But Not all Investors are Satisfied

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Investing.com — Online education companies are bringing home the bacon, but they are not all created equal in the eyes of investors.

K12 (NYSE:LRN) jumped 7% after reporting sales rose 44% in the first fiscal quarter to $371 million, compared to the estimated $363 million. Profit of 31 cents per share compared to the expected loss of 30 cents per share. Total enrollment topped 195,000, up 57% for a fifth consecutive year of growth. 

Meanwhile, Chegg (NYSE:CHGG) fell 10% after reporting third quarter earnings per share of 17 cents versus the expected 10 cents on sales of $154 million compared to the estimated $144 million. It also raised its guidance again, expecting fourth quarter sales of $188 million to $190 million and 2020 full year revenue of between $626 million and $628 million. 

Revenue for Chegg in 2021 is expected at about $775 million — and apparently that wasn’t enough to satisfy investors, according to Needham. 

“While investors may feel the urge to nitpick at the initial FY21 guide, we believe it represents a strong initial outlook off a difficult topline comp,” Needham analyst Ryan MacDonald said in a note. 

Nonetheless, he, among other analysts, reiterated a buy rating on Chegg and a $100 price target, according to StreetInsider. Chegg sales rose 64% year-over-year and subscribers jumped to 3.7 million, up 69% from a year earlier.  

Both Chegg and K12 are invested in skills-based learning, with Chegg having recently bought Thinkful, a coding bootcamp.

“There has always been a need to connect academic to professional pathways and we believe this moment in time will create a major acceleration of that trend,” said Chegg Chief Executive Officer Dan Rosensweig.    

K12’s career learning segment that focuses on skill development for middle and high school learners more than doubled to $48.8 million. Adult learners, a first time segment, came in at $8.3 million.  The general education segment, which focuses on core subjects in kindergarten through grade 12, grew 34% to $313.8 million. 

 K12 forecast revenue from $358 million to $366 million for the fiscal second quarter, and adjusted operating income of between $42 million and $45 million. For the full fiscal year, the company provided guidance of sales between $1.45 billion and $1.47 billion. Adjusted operating income should be in the range of $120 million and $130 million.