APEI: Strong Civilian Market Offsets Military Market Weakness

Piper Jaffray has published a research report on American Public Education APEI following reports of growth and modest beats on 3Q estimates. In the report, Piper Jaffray writes "The company's efforts to boost civilian enrollment growth are working, with a 58% y/y increase in 3Q Title IV student registrations vs. 10% growth in the traditional military market. Total registrations advanced 25% y/y vs. our 23% forecast. More importantly, company guidance calls for 26% to 29% y/y growth in 4Q registrations vs. our prior forecast of 18% growth. It appears that the company's increased marketing spending is having the desired impact in terms of driving increase non-military enrollments at a time when the military market is increasingly competitive. The company noted that military enrollments are "stabilizing", which we take to mean growing at a similar pace in 4Q to 3Q growth. The Wal-Mart partnership currently only accounts for "several hundred" students, a level that should grow sharply in 2011 and could potentially be a source of enrollment upside." Piper Jaffray maintains its Neutral rating and has raised the price target from $27 to $29. American Public Education closed yesterday at $27.07.