We recently compiled a list of the 7 Best Education Stocks To Invest In Now. In this article, we are going to take a look at where Grand Canyon Education Inc. (NASDAQ:LOPE) stands against the other education stocks.
Is the Education Sector Poised for Growth?
The education sector is undergoing a transformative phase, driven by technological advancements and shifting learning paradigms. The rise of online learning platforms and educational technology has reshaped how students and professionals access knowledge, creating a dynamic environment ripe for investment. With the global education market projected to grow significantly, now is an opportune time for investors to explore leading education stocks that are well-positioned to capitalize on these trends.
The education industry is not just about traditional institutions anymore, it encompasses a range of companies that provide innovative solutions, from online courses to tutoring services. By 2030, the market is expected to reach a staggering $10 trillion, representing over 6% of global GDP, as reported by HolonIQ by QS. This growth is fueled by a projected increase of 350 million post-secondary graduates and nearly 800 million more K-12 graduates worldwide. Asia and Africa are leading this expansion. To accommodate this student surge, the world will need to add an average of 1.5 million teachers per year, reaching 100 million teachers by 2030. Of these, 50% will be teaching pre-K and primary education. Post-secondary teaching will undergo a particularly significant transformation. The role of the teacher will evolve from a traditional role to a more mentorship-oriented approach. The K-12 education market is projected to exceed $5 trillion by 2030, reflecting the growing importance of early education and the need for a skilled workforce.
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According to market.us, the global EdTech market is projected to experience substantial growth, expanding from $220.5 billion in 2023 to $810.3 billion by 2033, with a compound annual growth rate of 13.9%. North America currently dominates the market, accounting for over 37.3% of the total revenue in 2023, reaching $82.24 billion.
AI, being the hot topic for almost all industries today, has seen increasing adoption across various sectors, significantly impacting the Edtech industry. The EdTech software industry is highly competitive, with 65,000+ companies vying for market share. Over 67% of recent EdTech unicorns incorporate AI in their products and services. A good example of such a company includes Squirrel AI, a leading Chinese AI startup, that offers personalized education solutions. Leveraging a vast student database and advanced AI algorithms developed in collaboration with YiXue Education, Squirrel AI provides adaptive assessments and tailored learning paths. The company has raised $190.4 million in funding since it was founded in 2014. It has received significant recognition, including the GITEX Best Education Technology Award in 2019 and the $1 million Artificial Intelligence for the Benefit of Humanity prize in 2021.
As educational institutions recognize the importance of integrating AI into their curricula, programs like Udacity’s AI Nanodegree are becoming essential for equipping future leaders with the necessary skills. The growing reliance on AI technologies underscores a shift towards more innovative and efficient educational practices, promising substantial returns as these trends continue to unfold. This trend, together with the robust performance of EdTech, underscores the overall growth trajectory of the education sector, fueled by rising demand for innovative educational solutions and a shift towards online learning platforms. This article will delve into the 7 best education stocks to invest in now that demonstrate robust financial performance and align with current market trends.
Methodology
We sifted through ETFs, online rankings, and internet lists to compile a list of 15 education stocks with high market caps. We then selected the 7 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A student giving a presentation to her peers in a well-equipped classroom.
Grand Canyon Education Inc. (NASDAQ:LOPE)
Market Cap as of October 22: $3.90 billion
Number of Hedge Fund Holders: 29
Grand Canyon Education Inc. (NASDAQ:LOPE) is a for-profit corporation that provides services to universities, specializing in program development, online education, and operational support. It’s a comprehensive education services provider offering a range of services, including technology, academic, counseling, marketing and communication, and back-office services. It also partners with 25 universities.
Management anticipates new and total traditional campus enrollments to remain relatively flat year-over-year, aligning with the low end of the original expectations. The Department of Education’s FAFSA processing problems have led to significant delays and errors, forcing universities to push back deadlines. This has resulted in a decline in FAFSA completions among high school seniors, including at GCU.
In Q2 2024, it made $227.46 million in revenue, up 8.02% year-over-year, with online enrollment growth of 7.5% and hybrid growth of 12.1%. Despite declining enrollments at many universities nationwide, Grand Canyon Education Inc. (NASDAQ:LOPE) and its partners continue to experience growth. This success can be attributed to its understanding of the untapped potential in the American labor force and its ability to offer creative delivery models and relevant programs that cater to the diverse needs of students.
With the resolution of FAFSA issues, inflation reduction, and other competitive advantages like low cost, low debt levels, relevant academic programs, and significant campus investment, it aims to reaccelerate its growth towards 50,000 students. The new enrollment goal for the ground campus is a 15% increase over this fiscal year.
The company continues to demonstrate innovative partnerships and program development. The goal of 80 partner locations, including 40 GCU locations, remains on track. Recent initiatives, such as the electricians’ pre-apprenticeship program and the manufacturing certificate program, showcase its ability to address industry needs and provide valuable educational opportunities.
Diamond Hill Long-Short Fund made the following comment about Grand Canyon Education, Inc. (NASDAQ:LOPE) in its Q4 2022 investor letter:
“Other bottom contributors included our long positions in Alphabet and Meta and our short position in Grand Canyon Education, Inc. (NASDAQ:LOPE). Post-secondary education services company Grand Canyon Education (LOPE) is benefiting from a positive inflection in online enrollment at Grand Canyon University (GCU), LOPE’s main client. This positive inflection may reflect some countercyclical demand for education as people anticipate a slowing economy and therefore return to school to finish or obtain a degree. Shares responded positively to this inflection, which is expected to similarly increase net online enrollment in 2023’s first half. Longer term, we have doubts about LOPE’s growth prospects in a crowded field and as many for-profit universities (including LOPE) face challenges — and heightened regulatory scrutiny — shifting to a non-profit business model.”
Overall LOPE ranks 3rd on our list of the best education stocks to invest in. While we acknowledge the potential of LOPE as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LOPE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
