Stride's $56 Million Investment: What Divisadero Street's Bold Bet Signals About the Online Education Stock

2025-12-23 12:42:26

The $56 Million Gamble in Online Education

A significant institutional investment just landed in the online education sector. Divisadero Street Capital Management established a fresh equity position in Stride, Inc. (NYSE:LRN) during Q3 2025, bringing 375,000 shares worth roughly $56 million into its portfolio. This move immediately elevated Stride to the fund’s 11th-largest holding, according to SEC filings dated November 13, 2025.

Why a $2.3 Billion Fund Took Notice

Divisadero Street, managing $2.29 billion in U.S. equity assets, allocated 2.44% of its portfolio to this single education technology play. To put this in perspective, Stride became the fund’s second-largest new position, trailing only established holdings like Dave Inc. ($184.45 million, 7.8% of AUM) and Turning Point Brands ($136.01 million, 5.7% of AUM).

The purchase came at approximately $149 per share—a price point now looking prescient given subsequent market movements.

The Aftermath: A Stock in Turmoil

Since that acquisition, the narrative has shifted dramatically. As of mid-November 2025, Stride trades at $64.98, representing a staggering 35% decline over the prior year and underperforming the S&P 500 by nearly half. The catalyst? A botched platform upgrade that cost the company between 10,000 to 15,000 new enrollments—a meaningful loss when considering Stride’s total enrollment base of roughly 250,000 students.

Understanding Stride’s Core Business

Stride, Inc. operates as a diversified online education solutions provider serving K-12 students, adult learners, employers, and government agencies. The company’s revenue model stems primarily from:

Contracts with public and private schools and districts
Direct-to-consumer virtual and blended education programs
Career and workforce development initiatives

The organization generated $2.48 billion in trailing twelve-month revenue with net income of $315.86 million, maintaining a five-year revenue CAGR of 18.2%. Its market capitalization stands at $2.85 billion.

Current Holdings Context

Within Divisadero Street’s portfolio, Stride represents emerging growth exposure alongside:

Dave Inc. (NASDAQ:DAVE) — $184.45 million position
Turning Point Brands (NYSE:TPB) — $136.01 million position
Super Group (NYSE:SGHC) — $129.79 million position
Sezzle (NASDAQ:SEZL) — $118.87 million position
Indivior (NASDAQ:INDV) — $81.07 million position

The Investment Case: Mixed Signals

Despite operational challenges, Stride’s fundamentals remain intact. The company exceeded analyst expectations during its most recent earnings report, and it retains its position as the leader in the learn-from-home education segment. The platform integration issues, while painful in the near term, appear addressable through focused remediation efforts.

The stock’s current valuation—trading at approximately 10 times earnings—presents what some view as a compelling entry point. However, the next few quarters will prove critical as management works to stabilize the upgraded system and restore confidence among school administrators and families.

Investment Perspective for Individual Investors

The real question investors face mirrors what institutional money managers like Divisadero Street must now contemplate: Is this a temporary setback in an otherwise sound business, or does it signal deeper operational concerns?

The stock warrants close monitoring rather than immediate commitment. For those considering exposure, a measured approach—building positions gradually rather than deploying capital in one transaction—offers a more prudent path forward. The combination of reasonable valuations, market leadership in its niche, and demonstrated revenue growth creates a reasonable foundation for watchlist consideration.

How Divisadero Street and similar institutional holders respond over the coming quarters—whether they add to positions, maintain holdings, or exit—will offer valuable signals about confidence levels in Stride’s recovery trajectory.

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