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AI Enhanced Investments: Morgan Stanley Predicts Five Edu Stocks Set to Shine with AI Tools

Last Updated November 24, 2023 1:20 PM
Giuseppe Ciccomascolo
Last Updated November 24, 2023 1:20 PM

Key Takeaways

  • Artificial intelligence (AI) is rapidly transforming the investment landscape.
  • AI offers new opportunities for investors to identify and capitalize on promising growth stocks.
  • AI-powered tools and algorithms can analyze vast amounts of data to uncover hidden patterns and trends.
  • There are five educational stocks that are well-positioned to benefit from the growth of AI.

In the realm of finance, artificial intelligence (AI) is rapidly gaining traction as a powerful tool for enhancing investment strategies. AI algorithms, capable of processing vast amounts of data and identifying complex patterns, are empowering investors to make more informed decisions and potentially achieve superior returns.

As AI continues to evolve and permeate the financial landscape, it is crucial to understand its potential impact on investment decisions.

What Influence Can genAI Have On Education?

While sectors like technology and medicine have often advanced rapidly, the field of education has traditionally progressed at a slower pace. However, a transformative shift appears imminent, with generative AI (genAI or AI). It is quietly revolutionizing the landscape of education, challenging the conventional classroom and lecture-based teaching model. This is not just a mere change; it represents a seismic shift.

GenAI has the potential to disrupt the traditional one-size-fits-all approach in education. It may do this by tailoring learning experiences to individual styles and needs, thereby enhancing effectiveness and engagement.

Applying the NEXT framework
Applying the NEXT framework – Credit: Morgan Stanley Research

Expert Stéphane Renevier said : “Its ability to improve accessibility benefits students with diverse abilities and those in remote locations. Real-time feedback and assessment, coupled with AI-driven administrative tools, have the capacity to expedite learning processes, allowing educators to concentrate more on teaching.”

Beyond reshaping the educational experience, AI is also transforming the sector’s business model. Morgan Stanley ‘s global tech team, using its NEXT framework, assessed the impact of AI on new business opportunities, efficiencies, and external productivity and content creation.

Applications of AI in education
Applications of AI in education – Credit: Morgan Stanley Research
“NEXT” is the acronym Morgan Stanley is using to analyze how generative AI will create meaningful opportunities for education companies.

How Can Investors Benefit From AI?

AI is set to boost productivity and cut labor costs by automating tasks. Among these, are administrative duties through virtual assistant chatbots, providing academic support via online tutors, and automating homework assessments. This includes generating course materials, easing educators’ workload, and reducing the reliance on extensive teaching staff.

For example, Coursera drastically cut the cost of translating a course into a different language, reducing it from around $10,000 to $20. In the long run, AI is expected to release resources, enabling companies to redirect them toward growth and innovation, emphasizing higher-value products and services.

Risk Assessment Criteria
Risk Assessment Criteria – Credit: Morgan Stanley

Furthermore, AI is poised to elevate product quality, create new revenue streams, and potentially increase company revenues. By enabling the development of more personalized and valuable learning experiences, AI may lead to heightened sales, the ability to command higher prices, and improved customer retention.

Additionally, it opens avenues for novel revenue sources by monetizing AI-based solutions such as proprietary large language models (LLMs).

Which Edu Stocks Will Shine?

Docebo

Docebo (DCBO)  emerges as the top-ranking company in Morgan Stanley’s framework, excelling in the AI domain with a combination of high upside potential and minimal risks. Renowned as a global leader in learning management software, Docebo’s AI-powered platform is at the forefront of workforce training. Docebo is not just an early adopter of AI innovations. It also demonstrates financial strength with a robust balance sheet and healthy cash flow. Its software-centric approach adds an extra layer of defense against potential AI-related challenges, solidifying Docebo’s standout position in the field.

Vitru

While Vitru (VTRU)  may not match Docebo’s performance, it shines in Morgan Stanley’s analysis with the highest returns in both ‘base’ and ‘bear’ scenarios. A key player in Brazil’s digital education, Vitru strategically utilizes AI, including cost-effective Large Language Model (LLM) tutors and personalized learning paths, despite significant debt, positioning itself for substantial gains.

Coursera

A well-established platform, Coursera (COUR)  is poised to connect learners with top-tier educators and institutions. With an extensive array of courses from elite universities, Coursera is harnessing AI for streamlined operations and customized course experiences. Positioned as a go-to platform for reskilling and B2B training, Coursera is aligning itself with the transformative impact of GenAI on the corporate world.

Potential returrns for investment in educational stocks
Potential returns for investment in educational stocks – Credit: Refinitiv/Morgan Stanley Research

Afya

A powerhouse in Brazilian medical education, Afya (AFYA)  offers a comprehensive range of programs. These vary from residency preparation to lifelong learning, for physicians and the healthcare sector. Backed by a strong balance sheet and in-house AI expertise, according to analysts, Afya will enhance its educational services and digital offerings for doctors, promising a further boost in revenue. The high demand and limited supply of medical personnel make this sector particularly resistant to potential downside risks.

TAL Education

Specializing in non-academic tutoring and content solutions, TAL Education (TAL)  is a China-based company strategically focusing on enhancing its AI capabilities. At the core of this strategy is MathGPT. It is a proprietary LLM that TAL plans to integrate into smart learning devices for public rollout. This marks a significant step in its data-driven education strategy.

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