Grand Canyon Education (LOPE): A Bull Run Ahead With Partnerships and Enrollment Growth

The education sector may be in a state of flux, but one company is leveraging partnerships and tech-driven scalability to carve out a winning streak. Grand Canyon Education (LOPE) is primed for outperformance as it heads into its Q2 2025 earnings report on August 6. With Q1 results showing 5.3% revenue growth and enrollment surges at off-campus sites, this stock is positioned to deliver a standout performance. Here's why investors should be ready to pounce.

The Q1 Momentum: Growth on All Fronts

LOPE's first quarter was a masterclass in execution. Service revenue hit $289.3 million, up 5.3% year-over-year, fueled by 5.8% total enrollment growth to 127,779 students. The real star, though, was its off-campus hybrid programs. Enrollment at these sites jumped 16.5% (excluding closures) to 5,027 students, driven by expansions in nursing programs and partnerships with employers and institutions. This isn't just about numbers—it's about higher-margin revenue streams.

The Accelerated Bachelor of Science in Nursing (ABSN) programs at off-campus sites are a game-changer. These partnerships generate more credits per student and higher tuition rates than traditional Grand Canyon University (GCU) agreements. With six new sites added in 2024 and one in Q1 2025, LOPE is scaling its footprint in high-demand fields like healthcare.

Tech Infrastructure: The Secret Sauce

LOPE's tech stack isn't just a support system—it's a revenue driver. The company's ability to integrate cutting-edge platforms for enrollment management, financial aid, and online learning has streamlined operations. This scalability is critical: 7.9% online enrollment growth at GCU and a 16.5% hybrid surge (excluding closures) show that LOPE's digital tools are attracting students and partners alike.

The company's $304.7 million in unrestricted cash as of March 2025 also gives it the flexibility to invest in new sites and programs without over-leveraging. This liquidity buffer is a stark contrast to rivals struggling with cash flow, making LOPE a low-risk play in an uncertain sector.

Full-Year Outlook: Margins Under Pressure, But Growth Ahead

Q2's results will test LOPE's ability to maintain momentum. Service revenue guidance for Q2 is $239.0–$241.5 million, a dip from Q1's $289.3 million, but this is seasonal—summer slowdowns are typical. The bigger question is margin stability.

Operating margins are expected to drop to 18.8%–19.4% in Q2, down from 30.4% in Q1, due to leap-year adjustments and contract modifications. However, management insists margins will rebound in the second half as traditional enrollments stabilize and cost controls kick in.

The diluted EPS guidance of $1.28–$1.33 (non-GAAP: $1.34–$1.39) aligns with the company's 9.7% full-year EPS growth target to $8.81. With a P/E ratio of 20.67 and a PEG ratio of 1.38, LOPE is fairly priced for this growth trajectory—but not overvalued.

Risks on the Radar

No investment is without risk. Regulatory scrutiny in higher education remains a wildcard. Changes to federal student aid policies or accreditation standards could disrupt LOPE's partnerships. Additionally, rising benefit and legal costs (up 4% in Q1) are a near-term pressure.

But here's why I'm not sweating it:
1. Diversified partnerships: 22 universities and employer collaborations reduce dependency on any single partner.
2. ABSN's profit power: These programs' higher revenue per student offset margin pressures elsewhere.
3. Share repurchases: The $200 million buyback program boosts EPS and signals confidence in the business.

Bottom Line: Buy Ahead of the Earnings

LOPE is a sector leader in hybrid and online education, with a model that's both scalable and defensible. The Q1 results and forward guidance suggest it's on track to meet its mid-to-high single-digit enrollment growth targets for 2025.

Investors should buy LOPE now, aiming for a 4%–6% pullback post-earnings. A target price of $210 by year-end is achievable if margins rebound and enrollment trends hold. With a strong balance sheet, program launches, and a stock that rose 4.6% after its last beat, this is a buy the dip opportunity.

Historical data shows that LOPE has tended to experience gains in the short term following earnings releases, with a 10-day win rate of 42.86% since 2022. This bodes well for investors positioning ahead of August 6.

The education sector may be choppy, but LOPE's partnerships and tech-driven growth make it a standout. This is a must-own name ahead of August 6—and beyond.