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Stride Increases EPS by 23% and Uses AI in Education in These Ways!

In the US model portfolio, we have celebrated great success with the AI stocks around NVIDIA, Super Micro and Dell. But we have also started to focus on profiteers that use AI to make their business better. Stride (LRN) sees itself as an education service provider that offers virtual learning and blended learning - a combination of classroom and e-learning. Its customers are public and private schools, school districts and school boards. It also offers solutions for employers, public authorities and consumers. The offering includes School-as-a-Service, for example, by helping customers to offer a fully operational virtual school. Core subjects such as math, English and history are covered, as well as vocational learning in fields such as IT and health. Although full-time online schools only cover a small percentage, acceptance of them has been growing, especially since coronavirus.

As Stride reported on the night of 24.04.24, the third quarter was another record quarter. Revenues increased by 10.7% to $520.8 million. Net income advanced 23% to $1.60 per share. Enrollments developed very well with a 9.1% increase to 198,400. As a result, the 2024 outlook was raised. The company is now forecasting revenue of $2.025 to 2.04 billion (previously $1.99-2.04 billion) and operating income of $280-290 million (previously $265-285 million). At the bottom line, net profit should land at $5.27. The P/E ratio would be 11, with net profit expected to climb to $6.15-8.35 per share by 2028. If this jump succeeds, Stride faces a revaluation in view of a P/E ratio of 8.5.

Stride is starting to use AI, but is not emphasizing it as much in the equity story. One is thoughtful. AI is helping with back-end processes such as billing and HR management, making it easier for teachers to create content, ideas and work, as well as offering an AI bot for learners to ask questions when they have problems. Education is becoming more individual, more targeted and also more automated. According to the latest conference call: "We remain committed to integrating AI and other technologies into our programs, but we will do so by giving teachers and students the right tools to complement their work and empower everyone involved. We are also looking at how we can leverage some of our content in an AI tool, using a small, proprietary language model that we can use to enhance our tutoring offerings."

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