Citron Is Long On K12, Predicts Over 150% Upside For Stock

Online education company K12 Inc. LRN is likely to be a key beneficiary of the "study-at-home'"trend necessitated by the COVID-19 pandemic, according to activist investor Citron Research.

K12 Is Teledoc of Online Education: K12 will emerge as the online school of choice for America's 57 million K-12 students and the leading back-end solution for the over 130,00 K-12 schools that are looking to shift from brick and mortar to a hybrid model with a full online component, Citron's Andrew Left said in a report released Tuesday.

"What Teladoc Health Inc TDOC did for medicine, LRN will do for education," Citron said.

Although online education is unlikely to fully replace the classroom, the firm expects a hybrid model of learning will continue to operate. As opposed to Teledoc, which has seen its stock rise 200% year-to-date as its total addressable market expands amid the pandemic, K12 is yet to capitalize on the prospect, Citron said.

K12 Stock Could Race Up to $100 In 2020: K12 shares are trading at a discount to its peers despite being the leader of online K-12 education, Citron said. The management is capitalizing on the emerging opportunity by adding infrastructure to prepare for an influx of demand.

The short seller reiterated his prediction that the stock is on track to hit $100. Citing the company's announcement of adding over 1,300 educators for the year 2020-21, Citron expects revenue growth to be more than double the consensus.

$LRN announced today increase educators by >20% for upcoming school year. meaning revenue growth should more than double consensus. K-12 is fastest growing segment of online education. At 3.5x sales (same valuation as TWOU), stock should trade at $100. Simple

— Citron Research (@CitronResearch) July 15, 2020

"While there are smaller players in the space, LRN is considered the highest quality platform with the most robust collection of curriculums and teachers," Citron said.

At last check, K12 shares were up 10.4% to $43.49.