Global spending on education will be worth $8 trillion by 2030, Morgan Stanley predicts, saying there are opportunities in the market that are “just beginning to be enabled by technology.” That is up from $6 trillion as of 2022, which represented 5.9% of the world’s gross domestic product, according to the investment bank. “Education is one of the most fragmented sectors worldwide, whether on a regional or global scale, and its consolidation process is just beginning to be enabled by technology,” said Morgan Stanley analysts in a recent report. “For companies that are able to leverage their digital capabilities and balance sheets, technology allows them to break physical barriers, democratize learning, and grow faster,” they added. “It also drives increased profitability through cost dilution, thus leading to a greater ability to reinvest in growth.” Technology and two other factors — problems in education that will push companies to come up with solutions, and undervaluation in education stocks — will be the key catalysts behind investment opportunities, the bank said. Stock picks Morgan Stanley named seven stock picks to capitalize on the trend. Here are four of them. Coursera : The U.S-listed online educational content platform is a key player that’s been able to tap operational efficiencies, and is both accessible and affordable, said Morgan Stanley. “We like the fact that Coursera is dedicated to providing universal access to education globally which we think is important as we consider upskilling/reskilling, and the general need for continued education,” the bank’s analysts wrote. The bank gave the stock a price target of $17, or 53% potential upside. 3P Learning : Morgan Stanley said the Australian firm is a “distinct” product that reaches a wide variety of groups – schools, teachers, parents and home users. It develops software for a range of ages, from those in kindergarten to those in their teens, the bank noted. “We like that the digital learning opportunity is currently available worldwide and that most programs offer users an engaging, meaningful, and personal learning experience,” the analysts wrote. The bank gave the stock a price target of 1.60 Australian dollars ($1.07), or potentially 35% upside. Arco Platform : Morgan Stanley says Arco is a leader in Brazil’s K-12 learning systems, and has a presence throughout the country. It added that Arco has been gaining market share, and it predicts the firm will grow at a 26% compound annual growth rate until 2025. The bank gave the stock a price target of $17, implying 42% upside. YDUQS : Morgan Stanley noted the firm, which is also a Brazilian player, is committed to being accessible and affordable to lower-income groups. “YDUQS has focused on its digital transformation efforts to attract a growing demand from consumers. Additionally, we think the company is well-run, with exposure to the main segments (campus, distant learning, and medical schools) and was able to navigate through the pandemic relatively well,” the analysts wrote. The bank gave the stock a price target of 13.50 Brazilian Real ($2.70), implying 57% upside. — CNBC’s Michael Bloom contributed to this report.
