Business Pulse: If You Invested In EdTech 5 Years Ago, How Much Would You Have Right Now?

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Plus results from Q2 earnings calls.

WIRIS

There comes a time in the process an industry’s maturity, where certainty and standardization give way to new unknowns. Some can only be discovered at scale, while others were ignored and now gain prominence.

It is reasonable to argue this is the landscape for learning technologies today in the U.S.

After reaching a saturation point in Higher Ed, LMS look into new markets. Does business as usual assures success or risks in uncharted territory? Likewise, new, more specific technologies gain interest. When will their disruption reach its height, and who, if anyone, will put the brakes on them? Finally, in the absence of absolute domination, the otherwise expected mergers and acquisitions dynamics do not show up in full force. All of which makes for a space worth following closely.

Keeping up with earning calls, we share a 5-year perspective on a few key examples. What will the next 5 years await?

For comparison:

  • Accounting for inflation $1,000 worth 5 years ago amount to $1,078 today
  • $1,000 in 5-Year Treasuries maturing today would return $1,690
  • $1,000 distributed 5 years ago across the FAANG (Facebook, Amazon, Apple, Netflix, and Google) would be worth $2,528 today
  • $1,000 in the S&P 500 would be worth $1,496 today

Instructure (INST)

Had you invested $1,000 USD at IPO (November 2015), today you would have: $2,144

Market Cap today: $1.49 Billion

LMSPulse Outlook

The results of the LMS business lighthouse that is Canvas parent company get a barely passing score. Still burning cash and with increasing revenue and marketing costs, the trend towards slimmer operating costs took a detour. Wall Street seems confident on the CEO, as it continues to produce enrollment results and refinements on the technology, supporting platform and overall experience. Lean times are ahead, as competition will drive prices and margins further down; not to mention the threat of customers finally realizing Moodle does more and better for a lot less. Still, in the eyes of many, it could have been worse.

2U

Had you invested $1,000 5 years ago, today you would have: $1,026

Market Cap today: $1.01 Billion

LMSPulse Outlook

Infamous 2U fell hard for the second time after earnings this year, with a drop that effectively deems Instru more valuable. Some activists believe this is not only the result of doing business, but malfeasance. A class action lawsuit is in the works. Others are more forgiving, not entirely happy, after CEO, Chip Paucek, recognized the current direction of its business model will not lead to profitability. Technologically speaking, the mystery deepens, as said model proves, among other things, that enrollment marketing was driving growth instead of more substantial innovation. In the most forgiving scenario, by the time they figure out an actually technology-driven value proposition, a handful of competitors will have been able to take over.

K12

Had you invested $1,000 5 years ago, today you would have: $1,750

Market Cap today: $1.099 Billion

LMSPulse Outlook

A series of initiatives under the guise of “career connections,” looking forward to bridge future workers with prospective employees is a promising avenue for K12, if not a hail Mary after the toll it continues to take from low enrollments and school closures in the U.S. The leadership admitted this year and next will see “dampened” revenue growth. It remains optimistic, however, especially towards its “AI” technology despite being mentioned exactly once throughout the earnings call.

TAL Education Group

Had you invested $1,000 5 years ago, today you would have: $6,073

Market Cap today: $19.12 Billion

Earnings call scheduled for August 21st.

New Oriental Education

Had you invested $1,000 5 years ago, today you would have: $4,554

Market Cap today: $16.7 Billion

LMSPulse Outlook

It would seem the golden age of China’s EdTech started half a decade ago. And with another year of 2-digit growth (over 32% rise in enrollments), New Oriental is ahead in its own right. It is interesting to see how despite the turning economic landscape of the country, the fundamentals of Chinese EdTech remain strong and necessary, to the point of resembling more developed countries. The refinement over the years of the technology and talent mix has allowed for a business that can afford first-world wages for emerging students in “merged” (online and in-person) settings. The company continues to chart a path of diversified, added value services on advanced digital platforms.

Pearson

Had you invested $1,000 5 years ago, today you would have: $660

Market Cap today: $6.4 Billion

LMSPulse Outlook

Timid growth on the markets of its main focus, the highlight of Pearson’s tumultuous existence has been the reported effectiveness of its debt-reducing initiatives. It maintains a market advantage on assessments and standard examination, especially from international students aspiring to British or American schools, but one which to date has not translated to innovative technology. In fact, they seem to be willing to resemble Chegg by copying its strategy with a few months embargo. If you want news on how Pearson disrupt the learning space, sit tight for 3-5 years if any.

Adtalem Global

Had you invested $1,000 5 years ago, today you would have: $1,123

Market Cap today: $2.72 Billion

Earnings call scheduled for August 22nd.

ATA

Had you invested $1,000 5 years ago, today you would have: $470

Market Cap today: $47.5 Million

Earnings call scheduled for the evening of August 14th.

Career Education Corporation

Had you invested $1,000 5 years ago, today you would have: $4,318

Market Cap today: $1.53 Billion

LMSPulse Outlook

The for-profit online education company had a breakout beginning of the year, which seems to be sustaining positive performance well into the second half. Having settled an FTC inquiry on deceptive marketing practices for $30 million, people’s outcries over these kinds of companies and practices seem to have taken a back seat. Technologically speaking, the U.S.-focused company reports evidence for impact of its analytics solution into engagement and the effectiveness of coaching and advising services; plus its expansion of onboarding tech (virtual assistant Lucy included) bodes well for a healthy volume of admissions in the long run.

Chegg

Had you invested $1,000 5 years ago, today you would have: $6,685

Market Cap today: $4.99 Billion

LMSPulse Outlook

Chegg continues to show how powerful it is to create positive brand association by lowering student expenses, especially in the prickly issue of soaring textbook costs. Chegg is in a privileged position in the merge of physical and interactive content format delivery, with millions of items and a focus on an amenable user experience. Beyond the U.S. there could be reason for optimism, as the problems it is tackling seem fairly recurrent and standard around the globe.

Cornerstone OnDemand

Had you invested $1,000 5 years ago, today you would have: $1,547

Market Cap today: $3.23 Billion

LMSPulse Outlook

Cornerstone kicks off the second half of the year on a positive pace. A track record of high-value customers and a proposition focused on subscriptions, content delivery and innovation, mean LMS looking to jump into the U.S. corporate and federal cloud-based learning market will have zesty competition ahead. While present worldwide, North America is expected to remain as a priority as it refines an HR-focused learning solution.


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