Strategic Education: How Its Shift To B2B Makes It A Strong Buy

2026-07-09 06:18:36 ET

Strategic Education ( STRA ) is moving away from the B2C education that has low margins to become a leading provider of edtech services with institutional partnerships driven by educational technology services. While t he company faces a decline in unaffiliated enrollments in traditional education, the ETS segment witnessed strong results during Q1 with revenues of $41.5 million and 21.0% growth, as management is carrying out a process of intentional cannibalization of low-margin traditional education in favor of directing investments toward employer-affiliated partnerships through its Workforce channel. The Workforce Edge has become an integral part of the HR benefits package for 82 major companies. Large companies cover the costs of educating their employees as a vital means of retaining talent and reducing the cost of external hiring. This means that the current inflationary environment works in favor of STRA. Since the companies pay for education, the cost is no longer a debt burden on the individual, which reduces the risk of bad debt expenses that had already fallen in Q1 to 3.7% compared to 4.2% YoY. More importantly, the ETS segment now represents 46% of total operating income and once the market realizes that nearly half of the profits now come from recurring subscriptions and the tech segment, it will consider revaluing the stock, bringing its multiples closer to SaaS companies . As a result, I assign the stock a Strong Buy Rating with a potential valuation of $117 per share....

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