In this article, we discuss the 10 online education stocks to buy. If you want to skip our detailed analysis of these stocks, go directly to the 5 Online Education Stocks to Buy.
The rapid spread of the Omicron variant of COVID-19 is causing much concern around the world as governments reintroduce mask mandates and debate lockdowns to contain it. The virus fears have also crept into the stock market as investors pour their money into stocks that have a better chance of providing them with returns in the pandemic economy. One of these sectors is the online education market. Global edtech investments into startups alone totaled over $10 billion in the first half of 2021, up sharply from $7 billion in 2019.
Market research firm Mordor Intelligence estimates that the online courses market will grow at a compound annual growth rate of 29% till 2026 to reach $18 billion in sales. As billions of children once again face the prospect of at-home schooling, this figure could more than double or triple this year, depending upon the virus lockdowns. Within the industry, investments in virtual reality and learning management systems are playing a key role in differentiating the best from the rest.
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Some of the top tech stocks that play an important role in online education through the products and services they offer include Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG), among others discussed in detail below.
Our Methodology
These were picked based on business fundamentals and analyst ratings. The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.
Online Education Stocks to Buy
10. Chegg, Inc. (NYSE:CHGG)
Number of Hedge Fund Holders: 39
Chegg, Inc. (NYSE:CHGG) owns and runs a learning platform. Dan Rosensweig, the CEO of the company, recently acknowledged that the company had registered a minor blip in performance due to “short-term industry conditions rather than anything company specific”.
BMO Capital analyst Jeffrey Silber has a Market Perform rating on Chegg, Inc. (NYSE:CHGG) stock with a price target of $49. In an investor note, the analyst appreciated the earnings beat of the firm in the third quarter but lamented lowered guidance numbers.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Polar Capital is a leading shareholder in Chegg, Inc. (NYSE:CHGG) with 999,122 shares worth more than $67 million.
Just like Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG), Chegg, Inc. (NYSE:CHGG) is one of the stocks that hedge funds are buying.
In its Q2 2021 investor letter, Alger, an asset management firm, highlighted a few stocks and Chegg, Inc. (NYSE:CHGG) was one of them. Here is what the fund said:
“Chegg, Inc. was among the top detractors from performance. Chegg provides online textbook rentals and other internet delivered services, such as homework help, tutoring and assistance with obtaining scholarships and finding internships. The company has been acquiring customers at low cost, in part because it is a leader in providing supplementary educational services to college students. Its Chegg Services offering helps students master subjects, get better grades, graduate and pursue careers. After posting a very strong 2020, the stock has experienced a general pullback based on the market perception that Chegg was simply a “Covid-19 beneficiary” and now with a reopening economy will experience weakness. We believe, however, that the company’s recent inroads to previously untapped international markets and new controls on shared password/account access are positive developments for Chegg.”
9. Stride, Inc. (NYSE:LRN)
Number of Hedge Fund Holders: 21
Stride, Inc. (NYSE:LRN) is a technology-based education services firm. The stock has soared in the past few months as the company reports impressive increase in enrollments, driven by the surging interest in the Career Learning segment.
In September, Citi analyst Thomas Singlehurst initiated coverage of Stride, Inc. (NYSE:LRN) stock with a Buy rating and a price target of $65, underlining the firm as a “compelling play” for investors in the online education industry.
At the end of the third quarter of 2021, 21 hedge funds in the database of Insider Monkey held stakes worth $145 million in Stride, Inc. (NYSE:LRN), the same as in the previous quarter worth $106 million.
In its Q4 2020 investor letter, Wasatch Micro Cap Value Fund highlighted a few stocks and Stride, Inc. (NYSE:LRN) was one of them. Here is what the fund said:
“The largest detractor from Fund performance for the fourth quarter was Stride, Inc. (LRN), formerly known as K12, Inc. This technology-based education company offers proprietary curriculum, software and services created for online delivery to students in kindergarten through 12th grade. The stock declined despite reasonably strong enrollment. In hindsight, we underestimated investor concerns that there’ll be considerably lower demand for the company’s services as the economy reopens more fully. Nevertheless, we believe those concerns may be overblown and it’s possible the pandemic has changed parents’ and students’ mindsets toward online education. Therefore, we think annual growth—even after the pandemic ends—could be at double-digit rates. This is because the industry itself and Stride’s market share both have plenty of room to expand. Moreover, any reluctance to give Stride a try could be reduced because the company’s fees are paid by schools, not by parents. And Stride is expanding by also offering at-home services that are integrated with school-based education.”
8. Zoom Video Communications, Inc. (NASDAQ:ZM)
Number of Hedge Fund Holders: 56
Zoom Video Communications, Inc. (NASDAQ:ZM) owns and runs a video-first communications platform. Kelly Steckelberg, the CFO of the firm, recently said that Zoom was focused on the launch of new products rather than the “stock price”, an apparent reference to the year-to-date decrease in Zoom stock price as the economy normalizes and offices reopen.
Wells Fargo analyst Michael Turrin has an Equal Weight rating on Zoom Video Communications, Inc. (NASDAQ:ZM) stock with a price target of $245. In a recent investor note, the analyst forecast that the firm will continue to grow in the coming months at a slower rate.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Tiger Global Management LLC is a leading shareholder in Zoom Video Communications, Inc. (NASDAQ:ZM) with 4.7 million shares worth more than $1.2 billion.
In its Q1 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Zoom Video Communications, Inc. (NASDAQ:ZM) was one of them. Here is what the fund said:
“We concluded our campaigns in Zoom Video Communications. We have been paring our position in Zoom for several quarters, anticipating the reduced need for video conferencing as vaccination rates climb and people return to their workplaces. That said, we believe there is a strong case to be made that the pandemic has prompted a permanent inflection in videoconferencing’s importance—sustainably higher remote work arrangements, more online learning and less business travel. Furthermore, the company’s dramatically expanded user base (up 485% YoY in Q3) positions it well to cross sell additional services, Zoom Phone in particular. The long-term future remains bright, but we decided to end our successful investment campaign in favor of opportunities in our pipeline with more attractive near-term growth prospects.”
7. RingCentral, Inc. (NYSE:RNG)
Number of Hedge Fund Holders: 48
RingCentral, Inc. (NYSE:RNG) provides software-as-a-service solutions. The company recently announced that it would be paying $650 million to Mitel, a communications firm, in a strategic deal to purchase patents covering network management, security, and infrastructure.
Needham analyst Ryan Koontz recently maintained a Buy rating on RingCentral, Inc. (NYSE:RNG) stock and raised the price target to $400 from $360, appreciating the stellar third quarter earnings report of the company.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Tiger Global Management LLC is a leading shareholder in RingCentral, Inc. (NYSE:RNG) with 3.9 million shares worth more than $859 million.
Here is what Baron Opportunity Fund has to say about RingCentral, Inc. (NYSE:RNG) in its Q2 2021 investor letter:
“RingCentral, Inc. has been a three-year portfolio holding and remains a leader in the cloud unified communications-as-a-service (UCaaS) space, which includes voice, video, messaging, and call center services. But after posting its third quarter in a row of accelerating revenue growth in the first quarter, RingCentral’s shares began to sell off on fears around heightened competition with both Microsoft Teams, of which RingCentral is a partner, and with Zoom Communications, a former partner who has launched its own voice communications offering. Shares sold off further during the period with the rotation out of secular growth names into cyclicals. We used the pullback in the shares to add significantly to our position given RingCentral’s best-in-class UCaaS technology, including five 9’s contractual service commitments (fully operational 99.999% of the time) for voice, which is orders of magnitude above its competitors; presence in roughly 40 countries; data governance and security requirements; number portability with all the relevant domestic and international carriers; and positioning as the Gartner Magic Quadrant UCaaS Leader. The UCaaS market is still quite early in its adoption curve, with only about 3% penetration of the roughly 400 million existing business landline seats in operation today. We believe RingCentral is in a solid position to capture meaningful share of this market, with its exclusive partnerships with legacy landline players like Avaya, Atos, and Alcatel, which effectively gives it a “hunting license” for about half of those 400 million legacy seats, leveraging joint go-to-market efforts with each partner. We remain confident that RingCentral is well positioned to achieve at least 30% top-line growth for years to come, along with steadily improving operating margins and free cash flow generation.”
6. Coursera, Inc. (NYSE:COUR)
Number of Hedge Fund Holders: 25
Coursera, Inc. (NYSE:COUR) operates an online educational content platform. The company crossed the $100 million in quarterly revenue mark earlier this year, boosting the share price by as much as 17%.
In August, investment advisory Raymond James upgraded Coursera, Inc. (NYSE:COUR) stock to Outperform from Market Perform with a price target of $45. Brain Peterson, an analyst at the advisory, issued the ratings update.
At the end of the third quarter of 2021, 25 hedge funds in the database of Insider Monkey held stakes worth $173 million in Coursera, Inc. (NYSE:COUR), up from 11 in the previous quarter worth $52 million.
In addition to Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG), Coursera, Inc. (NYSE:COUR) is one of the stocks attracting the attention of elite investors.
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Disclosure. None. 10 Online Education Stocks to Buy is originally published on Insider Monkey.
