As the novel coronavirus spread throughout the U.S. and globally, a broad-based shift toward online education commenced. Education-technology services company Zovio (NASDAQ:ZVO) has thrived in this environment. At the same time, Zovio stock presents an opportunity to invest in the online-learning revolution.
The pivot to virtual classes certainly began prior to the onset of Covid-19. However, that unfortunate event had the effect of expediting the move from in-person classes to fully online learning modalities. It could even be argued that education will never revert to the way it was prior to the pandemic.
Zovio’s business model was already in place before the spread of the coronavirus. Being an early innovator in the online-education space provided an economic moat for Zovio. And Zovio’s stockholders are poised to enjoy consistent returns over the long term.
A Closer Look at Zovio Stock
The U.S. Securities and Exchange Commission classifies stocks priced under $5 as penny stocks. Therefore, Zovio would technically be a penny stock. As such, it can be a fast mover and it’s advisable to limit oneself to small positions in this stock.
All that being said, at the current trajectory it’s possible that Zovio stock will escape from its penny-stock classification. The shares bottomed out at the very low price of $1.11 in March. In hindsight, we can see that this was a terrific opportunity to buy the stock at a deep discount.
The bulls are now attempting to hold the $3 level. Zovio stock last touched that price point in August of last year. So, a strong break of $3 and eventually $4 on heavy volume would show that the bulls are in full control of the price action. Therefore, traders should monitor those levels in the coming weeks.
A Different Way to Learn
Zovio’s tech-augmented solutions sometimes focus on businesses but are primarily targeted toward the higher-education sector. This market has undergone a radical transformation in 2020, mainly due to the Covid-19 pandemic.
By the middle of April, 190 countries around the world underwent nationwide school closures. Nearly 1.6 billion people, or 90% of the total enrolled learners, were impacted by this jarring event.
Of course, the wheels of the education machine couldn’t simply grind to a halt. Courses were basically forced to commence or continue online. This was disruptive to students, teachers, parents and school administrators. Clearly, there was a strong need for robust and user-friendly virtual-learning platforms.
Zovio was, and is, in the right market at the right time. The virtual-learning market was already worth $107 billion in 2015, but that’s just the beginning. This burgeoning market is projected to be valued at $350 billion by the year 2025, meaning that the industry should triple within 10 years’ time.
Outstanding Results in Challenging Times
Even as many sectors of the economy floundered while the pandemic gripped the world in fear, Zovio was able to conduct its business during the first quarter.
During the three months that ended on March 31, Zovio posted highly encouraging data. For instance, Zovio’s balance sheet was strong as the company reported quarterly cash and cash equivalents of $61.3 million.
The company even showed some year-over-year improvements. For example, Zovio’s quarterly net income was $2 million. In the comparable period of the prior year, the company sustained a quarterly net loss of $6.6 million.
In addition, Zovio reported quarterly diluted income per share of 6 cents. For comparison, during the same three-month period of the previous year Zovio reported a diluted loss per share of 24 cents.
The Bottom Line on ZVO Stock
Time will tell whether Zovio stock will break through and hold the key $3 and $4 levels. The bullish scenario is the most likely one, though, as Zovio remains fiscally sound and online education is a globally significant phenomenon that’s here to stay.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, David Moadel did not hold a position in any of the aforementioned securities.