What Happened?
Shares of higher education company Strategic Education (NASDAQ:STRA) fell 3.4% in the morning session after the company reported second-quarter results that showed a miss on revenue and a decline in student enrollment. While the for-profit education company reported earnings per share that beat analyst estimates, its revenue of $321.5 million fell short of expectations. The negative sentiment was likely compounded by a decline in student enrollment. The company's U.S. Higher Education segment saw student enrollment dip by 0.8%, while its Australia/New Zealand segment experienced a more significant 3.1% decrease. Reports indicated this drop was due to regulatory changes impacting international students. Despite the earnings beat, the combination of a revenue miss and shrinking enrollment appeared to raise concerns among investors about the company's growth trajectory.
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What Is The Market Telling Us
Strategic Education’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 5 months ago when the stock dropped 17.6% on the news that the company reported weak fourth-quarter results, with domestic student numbers falling short of expectations. Revenue for the quarter grew modestly by 2.9% year-on-year, but operating income declined significantly compared to the same period last year. On the other hand, Strategic Education beat analysts' EPS and EBITDA expectations this quarter. Zooming out, we think this was a mixed yet weaker quarter.
Strategic Education is down 16% since the beginning of the year, and at $77.61 per share, it is trading 35.8% below its 52-week high of $120.83 from July 2024. Investors who bought $1,000 worth of Strategic Education’s shares 5 years ago would now be looking at an investment worth $577.43.
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