As the future of work changes, so does education.
Next-gen education stocks rapidly rise to meet learners as they adapt to changing trends and educational demands. But identifying the top education stocks to capitalize on a hazy future demands eschewing legacy models in favor of something different.
Just look to 2U Inc. (NASDAQ:TWOU) for a model of what not to look for in education stocks. The company tried to shoehorn digital applications into a legacy learning model. And, broadly speaking, it fell flat on its face as one of the worst-performing stocks this year.
Instead, investors need to find education stocks actively changing the landscape – not merely tweaking existing structures. So, let’s dive in.
Duolingo (DUOL)
Duolingo (NASDAQ:DUOL) is likely the name when you think of this year’s hottest education stocks. The company’s share price more than doubled this year, stacking 240% returns since January.
Most of that enthusiasm came on the heels of an earnings report that included surging subscription rates. That rate climbed 60% year over year (YOY), adding over $121 million for the quarter. Based on its popularity and performance, Duolingo also announced a new slate of offerings, including expanded language options, music, and math lessons.
Duolingo combines some of the biggest trends in the future of education. Remote and mobile interfaces ensure students can learn on the go as needed. At the same time, gamification sparks renewed interest in learning difficult topics. Likewise, Duolingo meets younger users while they’re already using their phones, providing an immediate integrability.
To be fair, Duolingo seems somewhat overvalued today. And, despite its dominance among education stocks, there’s practically no moat for the EdTech company. Though new entrants face an uphill battle, an existing giant like Apple (NASDAQ:AAPL) or Microsoft (NASDAQ:MSFT) easily could squeeze them out of the market. For the time being, though, Duolingo stands as one of the top education stocks to buy today.
Zoom (ZM)
Remote learning is a hallmark of the future of education. No stock is as well-positioned to capitalize on the trend as Zoom (NASDAQ:ZM). We’re all intimately familiar with Zoom’s core offerings. Still, many overlook the new suite of tools the remote communications company offers.
Now, Zoom is diving deep into generative AI to improve user experiences. In fact, they’ve unleashed a slew of features earlier this year. The company’s AI assistant will integrate with each of Zoom’s distinct sub-platforms. These include meeting, chat, phone, email, and whiteboard tools.
Further, Zoom is increasingly establishing itself as a one-stop shop for education needs. Previously, during the pandemic’s onset, Zoom was almost solely a video chatting service. Yet today, it’s building a closed ecosystem for users. This reduces student friction, as they aren’t forced to download, pay for, and juggle multiple applications at once. At the same time, it increases customer stickiness, particularly as large education institutions partner with Zoom as the sole-source remote learning communications provider.
Chegg (CHGG)
Like Zoom, Chegg (NYSE:CHGG) is expanding from its roots into a holistic EdTech offering. Previously, Chegg focused solely on textbook rentals. But today, the company is leveraging AI to offer homework assistance and learning tools.
This points to another important point. The future of education might include AI assistance in day-to-day learning and homework within a traditional framework. But the long game includes self-serve learning tools independent of legacy institutions. And, Chegg is one of just a few education stocks front-running the trend.
In the most recent quarter, Chegg posted 10% YOY revenue growth and claimed strong results from initial impressions of its AI offerings. Also, CHGG unveiled a series of deep market analytic assessments to identify the pain points of current and potential customers. Therefore, they’re adapting their AI models and future offerings to meet lifelong learners where they’re needed most, ensuring Chegg’s longevity among education stocks.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
