Five Ways to Play the Global EdTech Boom

The number of individuals in the global education system is expected to increase by nearly two billion between now and 2050.[1]

That is an enormous figure.

This is, of course, good news. After all, academic qualifications will open up these individuals to new opportunities that would’ve otherwise been unavailable to them.

But there exists a problem. Our educational establishments are already struggling to accommodate today’s learners, let alone tomorrow’s. This is because, while other sectors have moved online, learning facilities across the board have been reluctant, slow, incapable and/or ineffective in adopting to digitisation.

Failure to incorporate technology to improve administrative productivity and teacher productivity and efficiency from a predominantly analogue foundation has had the knock-on effect of leaving schools undermined.

Meanwhile, failure to update curriculums to account for the digital skills needed for today’s ever-changing jobs landscape has meant learners are lagging behind precisely at a time where foundational digital skills are becoming the touchstone for hiring decisions worldwide.

This is creating a massive digital infrastructure catch up play in education. And the sector is now responding in earnest, with global spending on Education Technology expected to swell from $USD 163 billion in 2019 to more than $USD 404 billion by 2025.[2]

But with this latter figure still representing only 5.5% of total global education expenditure, a large amount of upside potential still persists.[3]

With the vast majority of EdTech innovation being driven by forward thinking companies around the world, now is an excellent opportunity for investors to gain exposure to this megatrend. Here are some of companies currently leading the charge…

1) 2U

2U has established itself as an online programme manager helping US universities offer online education and services spanning free courses to degree programmes.

It has made a number of large acquisitions over the years, but perhaps the most significant one was the purchase of edX in November 2021 for $USD 800 million.[4]

edX is a massive open online course provider created by Harvard and MIT to host online university-level courses in a range of disciplines for students worldwide. And the biggest announcement we learned from 2U’s recent results was a planned leveraging of this capacity to transition from what we’ve seen as a service player with a technology arm into a platform technology marketplace.[5]

2) Udemy

The company only listed in 2021, but has already made its mark as a phenomenal marketplace of short, on-demand online educational and vocational courses.[6] In fact, as it stands, it offers more than 204,000 programmes for some 54 million students worldwide.[7]

Much of Udemy’s growth was sourced from B2B channels during the pandemic, as employers worldwide looked for ways to support and upskill their employees in their isolated environments. Its performance has picked up in recent months (following the post-lockdown lull) as its growth has continued as the sector shift towards an omni-channel approach.[8] The days of having to take a specific class in a specific place at a specific time are passing, with students now learning wherever and whenever they want.

3) Chegg

Chegg is another stock that boomed during the pandemic, passionately offering, among other things, help to higher education students through digital textbook rentals.

It is leading the rapidly-emerging trend of “flipping” the education world’s traditional focus on core physical print resources on its head, replacing this with digital interactive resources and servicing students across their lifelong learning journey.

While many universities would argue that the company works against their traditional methods of assessment, Chegg would counter that these very same institutions must reassess the repetitive ways in which they monitor their learners’ performance in an increasingly digital world.

4) IDP

With a market cap of close to $AUD 7.8 billion, this Australian stock is one of the largest on the list.[9]

IDP is engaged in recruiting international students for placement in English-speaking countries and delivering its widely recognised IELTS English language qualification alongside the University of Cambridge.

The company has soared over the past 5 years, with its share price continuing to rise in the wake of the pandemic.[10]

For a company dependent on travel, the impact caused by Coronavirus was somewhat buttressed by the fact that the company pivoted into online language learning which boomed during the pandemic and is expected to continue to grow going forward.

In fact, the value of the global language market is expected to grow from $USD 59.6 billion today to $USD 191.06 billion by 2028.[11]

The company also recently appointed Tennealle O’Shannessy as CEO – a powerful leader in global education, with a proven track record of building successful digital businesses.[12]

5) Duolingo

Duolingo is a language learning app offering bite-sized, 20-minute courses, to some 37 million users every day.[13]

Duolingo is not considered to be a true education stock by some due to its lack of affiliation with the traditional educational system. However, the fact remains that it is delivering truly phenomenal growth from EdTech – revenues rose by 55% to $USD 294.2 million year-on-year in FY 2021 alone.[14]

We expect this to endure as the trend towards language learning continues to mature.

Related ETF

LERN: Rize Education Tech and Digital Learning UCITS ETF

References:

[1] HolonIQ Forecasts 2022

[2] Ibid

[3] Ibid

[4] Inside Highered, “2U Completes Purchase of edX”, November 2021. Available at: https://www.insidehighered.com/news/2021/11/17/2u-completes-purchase-edx-creating-free-degree-platform

[5] PR Newswire, “2U Reports Results for Second Quarter 2022“, July 2022. Available at: https://www.prnewswire.com/news-releases/2u-reports-results-for-second-quarter-2022-301595695.html

[6] Bloomberg, “Udemy Raising $421 Million in Top-of-Range IPO”, October 2021. Available at: https://www.bloomberg.com/news/articles/2021-10-28/udemy-is-said-to-raise-421-million-in-top-of-range-ipo

[7] Udemy, 2022. Available at: https://www.udemy.com/

[8] Yahoo Finance, “UDMY”, 17 September 2022. Available at: https://finance.yahoo.com/quote/UDMY/

[9] Yahoo Finance, “IEL.AX”, 17 September 2022. Available at: https://finance.yahoo.com/quote/IEL.AX/   

[10] Ibid

[11] PR Newswire, “At 18.3% CAGR, Language Learning Market to hit USD 191.06 Billion by 2028 Global Growth Industry Trends, Value, Analysis & Forecast By Brandessence Market Research”, September 2022. Available at: https://www.prnewswire.co.uk/news-releases/at-18-3-cagr-language-learning-market-to-hit-usd-191-06-billion-by-2028-global-growth-industry-trends-value-analysis-amp-forecast-by-brandessence-market-research-832232810.html  

[12] IDP, “Tennealle O’Shannessy appointed IDP CEO and Managing Director”, August 2022. Available at: https://careers.idp.com/news/-tenealle-O’Shannessy-appointed-IDP-CEO

[13] Business of Apps, “Duolingo Revenue and Usage Statistics (2022)”, September 2022. Available at: https://www.businessofapps.com/data/duolingo-statistics/

[14] Duolingo, “Duolingo announces record results for fourth quarter and full year 2021”, March 2022. Available at: https://investors.duolingo.com/news-releases/news-release-details/duolingo-announces-record-results-fourth-quarter-and-full-year