The online business side of the for-profit education sector is expected to face more competition than the on-ground segment due to traditional schools and new learning technologies having a bigger impact on the online space because of the opportunity for consumers to shop more schools, and as traditional schools utilize their brands to attract prospective students, says Brandon Dobell, a Partner and Group Head, Global Services, at William Blair & Company, L.L.C.
“So online, we think, has a lot more competition. I think there’s still a good secular growth story there, because online is much more convenient, and in some cases is better suited, for the adult learner than an on-ground program,” he said. “But you’re going to have a lot of pressures from competition and from the rules that have changed around how you deliver and what you have to track for the students.”
Dobell likes Grand Canyon Education, Inc. (LOPE) due to its combination of low tuition price point, solid brand and management team, which is focused on not only academic quality but the impact of what that quality can do for financials. He says LOPE recently put up new enrollment growth, solid continuing population growth and raised its guidance.
“From a fundamental perspective, the thing that sticks out for us is the interplay between population growth and revenue-per-student growth. You are seeing more scholarships and discounting from a number of schools, but you are seeing improving retention at some schools, and those were all factors that really can impact our revenue estimates on a forward basis,” Dobell said.
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