Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of K12 Plunged 24% Early Wednesday After Mixed Financial Results

By Daniel Miller - Oct 23, 2019 at 3:25PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

K12 topped revenue estimates, but uncertainty remains. Here are the details investors need to know.

What happened

Shares of K12 Inc. (LRN -0.99%), an online educational company that offers an alternative to traditional campus schooling, shed as much as 24% of their value Wednesday before recovering some of those losses after releasing mixed fiscal 2020 first-quarter results.

So what

K12's top-line revenue growth increased 2.3%, to $257.1 million, compared to the prior-year result, which managed to top analysts' estimates calling for $253.9 million. The top-line growth didn't filter down to the bottom line: adjusted operating losses expanded to $13.9 million, compared to the prior-year's $9.7 million loss. K12's net loss per share checked in at $0.25, larger than the prior-year's loss of $0.22 per share and $0.06 per-share short of analysts' estimates.

Man standing in front of online educational graphics.

Image source: Getty Images.

Nate Davis, Chief Executive Officer and Chairman, said the following on the Oct. 22, 2019 conference call:

Specifically, on enrollment, our Managed Public School business grew to 122.3 thousand students. This is an increase of 3.5 thousand students or 2.9% year-over-year. Importantly, this marks the fourth year in a row that we have seen enrollment growth in our Managed Public School business.

Now what

K12's enrollment growth would have been even more impressive -- a 14,700 student increase instead of 3,500 increase -- had Georgia Cyber Academy not decided to work with new vendors after students in the academy performed below state averages.

LRN Chart

LRN data by YCharts.

While many will likely agree the educational system needs innovative solutions to improve and better meet the needs of students, investors seem unconvinced that K12 has its business figured out -- the stock is down 40% over the past six months. But stay tuned: The company has a pivotal year ahead as it tries to continue its enrollment growth streak and reverse operating losses.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

K12 Inc. Stock Quote
K12 Inc.
LRN
$35.96 (-0.99%) $0.36

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.