3. Grand Canyon Education Inc. (NASDAQ:LOPE)
Market Cap as of October 22: $3.90 billion
Number of Hedge Fund Holders: 29
Grand Canyon Education Inc. (NASDAQ:LOPE) is a for-profit corporation that provides services to universities, specializing in program development, online education, and operational support. It’s a comprehensive education services provider offering a range of services, including technology, academic, counseling, marketing and communication, and back-office services. It also partners with 25 universities.
Management anticipates new and total traditional campus enrollments to remain relatively flat year-over-year, aligning with the low end of the original expectations. The Department of Education’s FAFSA processing problems have led to significant delays and errors, forcing universities to push back deadlines. This has resulted in a decline in FAFSA completions among high school seniors, including at GCU.
In Q2 2024, it made $227.46 million in revenue, up 8.02% year-over-year, with online enrollment growth of 7.5% and hybrid growth of 12.1%. Despite declining enrollments at many universities nationwide, Grand Canyon Education Inc. (NASDAQ:LOPE) and its partners continue to experience growth. This success can be attributed to its understanding of the untapped potential in the American labor force and its ability to offer creative delivery models and relevant programs that cater to the diverse needs of students.
With the resolution of FAFSA issues, inflation reduction, and other competitive advantages like low cost, low debt levels, relevant academic programs, and significant campus investment, it aims to reaccelerate its growth towards 50,000 students. The new enrollment goal for the ground campus is a 15% increase over this fiscal year.
The company continues to demonstrate innovative partnerships and program development. The goal of 80 partner locations, including 40 GCU locations, remains on track. Recent initiatives, such as the electricians’ pre-apprenticeship program and the manufacturing certificate program, showcase its ability to address industry needs and provide valuable educational opportunities.
Diamond Hill Long-Short Fund made the following comment about Grand Canyon Education, Inc. (NASDAQ:LOPE) in its Q4 2022 investor letter:
“Other bottom contributors included our long positions in Alphabet and Meta and our short position in Grand Canyon Education, Inc. (NASDAQ:LOPE). Post-secondary education services company Grand Canyon Education (LOPE) is benefiting from a positive inflection in online enrollment at Grand Canyon University (GCU), LOPE’s main client. This positive inflection may reflect some countercyclical demand for education as people anticipate a slowing economy and therefore return to school to finish or obtain a degree. Shares responded positively to this inflection, which is expected to similarly increase net online enrollment in 2023’s first half. Longer term, we have doubts about LOPE’s growth prospects in a crowded field and as many for-profit universities (including LOPE) face challenges — and heightened regulatory scrutiny — shifting to a non-profit business model.”
