Listed education companies with technology-driven delivery models have seen the greatest increase in value since January, an analysis by this publication has found, demonstrating to an extent the ed tech sector’s resilience to Covid-19.  

At the beginning of June, the price of 15 out of 50 global education stocks tracked by this publication had risen since January, when the viral outbreak began to tear across the world. 

Companies compiled under EducationInvestor Global’s analysis operate across a range of educational subsectors, including early years, K12, higher education, vocational training, ed tech, publishing and after-school tuition. Analysis of movements in their share prices and thus market capitalisations offers an insight – albeit limited – into how education businesses across the world are coping with the coronavirus crisis through the eyes of public-market investors.

Organisations that generate significant portions of their revenues from delivering technology-enabled education have, generally speaking, fared better throughout the pandemic than traditional providers.

China Online Education Group, which despite its name is listed in New York, soared 120% between 2 January and 2 June, making it the list’s best-performing stock of the past five months. In the first quarter, the company, which orchestrates online classes taught to Chinese students by foreign tutors, said its net revenue grew 52%, as active student numbers were boosted by 26% to 286,600.  

Of five Hong Kong-listed businesses that made the cut, Koolearn, a provider of online courses founded by Chinese education giant New Oriental, witnessed the biggest growth as its share price climbed more than 85%. The group now has more than 8.5 million registered users who can choose from some 1,200 courses. Koolearn has a gross margin of 54% but is currently loss-making. 

Chegg, a US-based ed tech listed in New York that sells digital textbooks and offers online tutoring, saw its share price swell by 62% between January and June. As of May, the firm had 2.9 million subscribers – up 35% on last year. In the first quarter, net revenue also expanded by 35%, Chegg said. Late last year, the group acquired coding school Thinkful after buying WriteLab, an artificial intelligence-driven company, and StudyBlue, an online studying platform, in the years prior.

“The pandemic has accelerated the demand shift from offline to online, and has essentially ‘forced’ consumers to try online platforms and products,” said Mariana Kou, chief executive of Research Study Education Group and a former senior equity analyst at CLSA, an investment bank. “Many companies that have developed online products have seen a spike in demand and sales. 

“Meanwhile, many offline training companies have their operations completely suspended due to Covid-19 and had to shift their products and services online in order to keep some market share.

“While I expect customers would redirect some spending back to traditional offline services after the pandemic, it is likely that a significant portion would at least maintain some budget for online. 

“Therefore, this pandemic has indirectly helped ed tech on a net-net basis.”

Company Name Share Price Increase
(2 January – 2 June)
China Online Education Group  120%
Koolearn 85%
China Kepei Education Group 75%
China Gingko Education Group 63%
Chegg 62%
Wey Education 58%
GSX Techedu 53%
2U 48%
Scholar Education Group 46%
Zovio 46%
Huali University Group 29%
K12 Inc 29%
TAL Education Group 25%
NetEase 24%
Strategic Education 7%

In addition to Koolearn, four businesses whose market capitalisations increased despite the most turbulent economic environment in recent memory are listed in Hong Kong, a high-growth market whose education landscape institutional investors are familiar with. These are Huali University Group, Scholar Education Group, China Gingko Education Group and China Kepei Education Group – all of which operate private universities in China.  

China Kepei, which focuses on career-oriented qualifications, jumped 75%. The firm, which operates Guangdong Polytechnic College, Zhaoqing Science and Technology Secondary Vocational School, records annual revenue of HK$776 million (£79 million) and net income totalling HK$496 million. China Gingko, which offers courses in disciplines including management, engineering and economics, climbed 63%. Scholar Education Group saw its share price jump by 46%, while Huali University Group gained 29%. 

Yet, other private university operators across the world have been hammered by Covid-19, which stymied flows of international students and brought about unforeseen costs as institutions were forced to transition abruptly to online delivery. For instance, listed university operator Laureate, most of whose campuses are in the US and Latin America, saw its share price sink nearly 40% between January and June. Why, then, have China-focused providers fared better?

“The government is providing support for higher education institutions in China to shift their teaching online, so the delivery of content remains largely intact,” explained Kou. “Furthermore, as the job market is challenging, the Chinese government is also raising the quotas for higher education so that more junior-diploma students can get into bachelor’s programmes, and more college graduates may stay for master’s degrees.”

The eight remaining companies are listed either in New York or London. These are 2U, GSX Techedu, K12 Inc, NetEase, Strategic Education, TAL Education Group, Wey Education and Zovio. 

The past five months have been kind to GSX Techedu. The New York-listed moonshot, whose business model is like that of rival China Online Education Group, has this year been accused of systemic fraud and financial misreporting not once but three times by short-sellers. Despite a string of active lawsuits against the company, one of which relates to intellectual property theft and was filed by a rival organisation, GSX Techedu’s share price was 53% higher on 2 June than it was 20 weeks prior.

Date published: 5 June 2020

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