TLDR
- Stride stock fell 48% on Wednesday, marking its largest single-day decline on record
- The company beat Q1 earnings expectations with $1.52 per share but missed enrollment targets by 1,500 students
- New technology platform implementations caused 10,000 to 15,000 missed enrollments due to customer dissatisfaction
- Second quarter revenue guidance of $620-$640 million came in below analyst estimates of $648 million
- CEO James Rhyu acknowledged poor customer experience resulted in higher withdrawal rates and lower conversion rates
Stride crashed on Wednesday morning in what became the company’s worst trading day ever. Shares dropped 48% by midday. The decline erased all gains the stock had made through 2025.
The online education platform reported first quarter results that beat Wall Street expectations. Adjusted earnings came in at $1.52 per share on revenue of $621 million. Analysts had forecast $1.25 per share and $613 million in revenue.
Despite the earnings beat, the numbers told a different story. Enrollment reached 247,700 students, representing an 11% increase from last year. However, Wall Street had expected 249,200 students.
The miss might seem small at just 1,500 students. But for a company built on steady enrollment growth, it raised red flags. CEO James Rhyu pointed to technology problems as the main culprit.
Stride had spent months implementing new learning and technology platforms. The goal was to handle the company’s growing scale after years of 19% annual sales growth. The execution fell short of expectations.
“The implementations did not go as smoothly as we anticipated,” Rhyu said during the earnings call. The company is now working with its vendors to fix the issues.
Customer Complaints Mount
Customer feedback turned negative as users struggled with the new systems. Parents and students reported frustrating experiences with the upgraded platforms. The poor reception had real consequences.
Management estimates the technology disruptions cost between 10,000 and 15,000 enrollments. That’s a hefty number for a company with total enrollment under 250,000 students. The timing couldn’t have been worse, coming during peak enrollment season.
“We heard from our customers that their engagement with these platforms detracted from their overall experience,” Rhyu explained. The feedback loop created a domino effect. Higher withdrawal rates followed as existing customers grew frustrated.
New customer conversion rates also dropped. Families researching online education options likely heard about the technology troubles. Some chose competitors instead.
Weak Guidance Compounds Problems
The company issued second quarter revenue guidance between $620 million and $640 million. Analysts had been expecting $648 million heading into the report. The guidance miss added fuel to the selloff.
Rhyu tried to reassure investors that demand remains healthy. Application volumes haven’t dropped off. The company believes it can resolve the platform issues within a year.
The stock now trades at just 13 times earnings. That’s a steep discount from where it traded before the report. Some analysts suggest the valuation makes Stride a potential turnaround play.
The company’s five-year track record of growth remains intact on paper. But trust takes time to rebuild. Competitors now have an opening to capture market share while Stride fixes its systems.
Management stated the technology vendors are actively working on improvements. The company expects to restore normal operations and customer satisfaction levels over the coming months.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
