Join        Login             Stock Quote

Deutsche Bank Starts Capella Education (CPLA) At 'Hold', $39 PT

 April 03, 2012 03:06 PM

Deutsche Bank analyst Paul Ginocchio initiated coverage of Capella Education Co. (Nasdaq: CPLA) with a "Hold" rating and $39 price target.

Ginocchio said Capella Education is a well-established provider of graduate degrees with a 19-year history of providing distance and online-only education.

However, relatively high tuition rates, a nascent branding campaign and mounting competitive pressure from traditional universities and For Profit peers pose a risk to growth and margins.

While Ginocchio sees some upside to shares, it is offset by concerns over longer term positioning and outlook and more compelling opportunities elsewhere.

[Related -China Sets A Floor For Growth]

Based on analysis of the major nonprofit competitors, their growth, and the overlap with For Profits, the analyst believes the growth of the nonprofits is taking about 3 points off the enrollment growth of the For Profit sector, and up to 6 points off the growth rate of online enrollment growth for the For Profits.

Ginocchio believes this headwind will get incrementally stronger with each passing year. He has built a simple model with three assumptions to help investors size the impact.

The analyst did not think the overlap in addressable markets was significant between the nonprofits and For Profits. But based on conversations with nonprofit executives, lead generation execs, and reviewing the admission policies of the nonprofits, he thinks the addressable online market overlap is about 30%.

[Related -Comparing Two Engineering And Construction Stocks]

For a couple of the nonprofit schools Ginocchio spoke to, their new students say that the University of Phoenix was the most often considered other school. A strong brand that communicates a quality education is, in his view, crucial to long-term For Profit success.

CPLA is trading down 1.98% at $36.13 on Tuesday.



Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageBogle Says Indexing Destined To Win The Battle Of The Quants

Vanguard founder John Bogle gave a powerful speech last month at the Q Group’s Spring Seminar that lays out read on...

article imageVMAX and VMIN Poised to Be Most Important VIX ETP Launch in Years

REX Shares is launching two new VIX exchange-traded products on Tuesday in what is likely to be the most read on...

article imageThe April 29 Gold Triangle Breakout Update

If you’re just watching stocks, you may be missing this powerful Triangle Breakout surge in read on...

article imageSell In May, But It Is A Presidential Election Year

With May just around the corner, articles covering the "Sell in May' phenomenon are not in short supply and read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.