What happened
Shares of online-education company K12 (LRN 4.07%) were up 68.1% in July, according to data provided by S&P Global Market Intelligence. Schools typically open in the fall, but as the date draws closer, educators and parents alike are wondering how to reopen facilities safely in the coronavirus era. Increasingly, distance learning is viewed as part of the solution.
It's a scenario that attracted high-profile attention. Popular research firm Citron Research called K12 "the Teladoc of online education," sending the stock skyrocketing.
So what
K12 enables schools to go online with their classes. That's getting more important these days, and the idea is catching on. For example, in July, K12 partnered with Clarksville Community Schools in Indiana to launch the Indiana Gateway Digital Academy. This school will provide online access to students all over the state, which is important for parents wishing to physically distance their children from the coronavirus.
Citron Research sees two main catalysts for K12. First, its total addressable market is growing exponentially due to the COVID-19 pandemic. That creates an opportunity for robust revenue growth. Second, it believes K12 is undervalued relative to its peers, providing further opportunity for an increase in the stock price. Investors piled into K12 stock on that rosy analysis.
Now what
Back in April, K12 reported earnings for its fiscal third quarter. In the earnings call, CEO Nathaniel A. Davis said, "When the pandemic first started to impact brick-and-mortar schools, our phones began to ring off the hook." Perhaps this is a growth stock that's indeed about to take off.
Here's one thing for investors to chew on: On July 28, K12 announced it's hiring 1,300 teachers. For perspective, it currently employs 6,000. That's a massive increase, which suggests big growth is happening right now behind the scenes.
By all indications, K12 is growing. But details will have to wait until the company reports results for its fiscal fourth quarter on Aug. 11.
