Markets
LRN

Here's Why K12 Stock Took Off Today

What happened

It started off as a sleepy Tuesday morning for shareholders of online-education platform K12 (NYSE: LRN). Then, a prominent stock analyst called this company the Teladoc of online education, and shares took off.

K12 stock was up 12% today and has nearly doubled in 2020. Nevertheless, this stock analyst believes it will reach $100 per share before the end of the year, implying around 150% more upside.

LRN Chart

LRN data by YCharts.

So what

Citron Research is a firm with a large following. Perhaps best-known as a short seller, the firm does go long on certain stocks as well. Just last month, shares of Sonos spiked higher after Citron Research suggested it could go up six times in value as an acquisition target.

With K12, Citron Research sees massive changes in public education due to the coronavirus pandemic. Indeed, prominent school districts including Los Angeles and New York City don't plan to fully reopen on schedule, creating an education problem that desperately needs a solution.

Perhaps K12 is the solution schools are looking for. As CEO Nathaniel Davis said in the company's earnings call for the fiscal third quarter of 2020, "When the pandemic first started to impact brick-and-mortar schools, our phones began to ring off the hook." As schools scramble to develop plans for the new school year, perhaps that phone is still ringing.

The coronavirus pushed the adoption of telemedicine, and shares of Teladoc have risen 150% year to date as a result. It's a seven-month stock return any investor would love. Therefore, it's no wonder K12 stock spiked after being compared to Teladoc.

A businessman rides a rocket expelling cash exhaust over a multi-colored bar chart.

Image source: Getty Images.

Now what

The full report is available for free on Citron Research's website, providing more details on its bullish rationale. And it's worth reading. However, as always when investing in stocks, it's important not to get caught up with a single opinion. Try to see things from various viewpoints. If Citron Research's reasoning is valid, it'll withstand patient scrutiny. 

Personally, K12 is a stock I intend to look at more closely going forward. It does appear the coronavirus is pushing the adoption of online education, providing a growing addressable opportunity. 

10 stocks we like better than K12
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and K12 wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of June 2, 2020

 

Jon Quast has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Sonos Inc and Teladoc Health. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

LRN TDOC SONO

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More