Edtech Learning Curves: Could Sliding Stock Prices Suggest Pandemic Boom was a Flash in the Pan?

2020’s Covid-19 disruption proved to be a boon for edtech. As countless pupils, students, and adult learners alike turned to education technology platforms during global lockdowns and the implementation of social distancing measures; we saw many edtech platforms grow so rapidly that they opted to use their newfound success as a launchpad for an IPO. 

As a result, 2021 saw many edtech platforms such as Coursera, Udemy, and Duolingo all take the step to go public as a means of capitalizing on a hot IPO market and the unprecedented levels of interest shown in their respective platforms. 

However, despite edtech seeing record-breaking levels of capital flowing into its platforms, investors haven’t been quite as forthcoming with adding educational stocks to their respective portfolios. 

(Image: Tech.eu)

As the chart above shows, it took just the first half of 2021 to see edtech venture capital investments surpass $1 billion for the first time ever - a figure that represents some 15-times growth in investment levels since 2014. 

Despite this, edtech stocks across Wall Street have been heavily underperforming - especially those that opted to go public in 2021. So, whilst VCs appear eager to pump more capital into edtech, the stock market is indicating that skies may not be as clear as they seem for the industry. 

So, does this mean that the conditions caused by the pandemic that led to huge volumes of custom for edtech firms were only short-lived? Could the emergence of edtech be nothing more than a flash-in-the-pan? Let’s take a deeper look into what the future may hold for edtech: 

Navigating the Seas of Change

2021 saw a number of unicorn edtech companies go public, including Duolingo, Coursera, Udemy and Powerschool. Following an impressive 2020 across the board regarding remote learning platforms, launching an IPO represented a great opportunity for companies to capitalize on their growth and build on their product. 

After a launch in April 2021, Coursera was the first stock to raise the alarm that Wall Street wasn’t quite seeing eye-to-eye with the masses of venture capital entering the edtech space. At the time of writing, Coursera stock has fallen, amidst a handful of attempted breakouts, by nearly 41% from its debut price. 

Much like Coursera, Duolingo has followed a similar pattern of a brief price rally followed by a consistent rate of decline. At the time of writing, DUOL sits some 23% below its IPO price on the Nasdaq. 

Udemy has been a more recent addition to the edtech stock landscape, floating in late October. Due to the recency of its floatation, it’s unfair to read too far into the stock’s performance, but right now its price fall of 22.3% appears to loosely trace that of its market counterparts. 

However, it’s worth noting that not all 2021 edtech launches are underwater following their debuts. Thanks to an excellent price run, Powerschool Holdings Inc remains up some 13.56% on its initial launch price in July. 

Here, it’s extremely important to caveat these price observations with the fact that a widespread stock sell-off has been occurring across a range of industries owing to rising inflation rates and the cost of living for consumers. 

However, Patricia Miller, writing for Value the Markets, highlights the importance of questioning whether edtech actually solves a problem that exists in a post-pandemic world. 

“One of the biggest factors and areas of concern for investors is whether the products and services actually solve a problem or are they just nice to have? While undoubtedly, EdTech solved a very big problem and provided a continuation of education during the global pandemic, many question whether it is still required to the level it was or if there will ever be that requirement again,” Miller explains. 

It’s also essential to add that the boom in edtech services during the peak of the pandemic paved the way for many companies to emerge and contend with one another whilst offering similar products and services. This meant that the space has become extremely competitive whilst the market grows at a slower rate than its 2020 levels. 

The Case to Remain Bullish about Edtech

Despite the dwindling value of a number of edtech stocks Freedom24's head of investment research, Maxim Manturov, has remained bullish about the future potential of education technology companies. 

“It’s worth noting that there were attempts to integrate technology into education before, but the pandemic has accelerated and strengthened this trend,” Manturov notes. “This may increase the number of people willing to switch to online learning as it allows attending classes anywhere.”

“With trends and industry forecasts changing (researchandmarkets.com forecast the market to grow to $350bn in 2019 and Global Market Insights forecast $250bn in 2020, rising to $1 trillion by 2027), more companies are going public,” Manturov added. 

Although the short-term prospects of edtech stocks may not seem appealing to investors, it’s worth adopting a more long-term approach when calculating the potential of the industry. Following an unprecedented level of growth in 2020, it’s to be expected that edtech stocks will struggle to build on their previous successes in an industry still looking to find its feet after a period of exponential growth. 

However, the pandemic accelerated a pre-existing trend in the growing adoption of online education platforms. This indicates that, although a market correction may be underway, we’re likely to see plenty more growth across the edtech landscape in the longer term.