American Public Education Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of for-profit educator American Public Education (Nasdaq: APEI  ) were getting a lesson in pain from the market today, falling as much as 28% in intraday trading after the U.S. Marine Corps cut its Tuition Assistance Program funding.

So what: According to Reuters, the Marine Corps will now provide students with $175 per semester hour for undergraduate courses, down from $250 previously. This is a particularly big deal for American Public Education, which is the parent of American Military University and, as of 2010, had a student base that was 62% U.S. military. These current cuts are obviously bad news for the company, but they also raise concerns that similar cuts could be coming from other branches of the armed forces.

Now what: It's really been a rough road for for-profit education companies as many aspects of the sector's model have come under fire from regulators. With that as the backdrop, this military funding issue is a particularly tough turn for American Public Education and growth will almost certainly get dinged as a result. Possibly adding fuel to the selling fire today, short-seller Jim Chanos reportedly laid out a case against the for-profit educators, calling them a "national shame."

There may be a case to be made for sticking with American Public Education because of its strong market position, growth, and profitability, but investors will definitely want to take some time to digest what today's news means for the company's future.

Want to keep up to date on American Public Education? Add it to your watchlist.

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Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


Read/Post Comments (5) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 18, 2011, at 6:41 PM, TMFOpie wrote:

    Hey Matt,

    Thanks for the coverage on the big stock drop (a whammer).

    The bright side to APE is that it has the longest-standing brand among the military and the low-cost, most efficient provider of these services. So they actually could probably compete a little on price to keep tuition rates up, although that would hurt margins over time. They also have been moving more and more to first-responders in the civilian world, those with jobs who wish to utilize APE's platform to take additional classes. No tuition reimbursement like the DOD's but it still keeps APE's student profile in better shape then many other for-profits.

    So while this news is obviously not great for APE, the operational, all online platform could be its savior and actually allow them to take market share if the other schools pass up the lower reimbursements. We're watching it closely over here in Hidden Gems, where it's a buy.

    Thanks,

    Andy

    co-advisor, HG

  • Report this Comment On October 18, 2011, at 8:03 PM, spoonbillmgmt wrote:

    APEI courses should still be free to active military personnel if they use Pell Grants in addition to military tuition assistance. But I agree that APEI is likely to actually pick up share from more expensive universities.

  • Report this Comment On October 20, 2011, at 2:52 AM, moosh31 wrote:

    Well, technically the Marine Corps reduced their rates to $175/undergrad semester credit, but restricted TA to only 5 semester credits paid for in the entire Fiscal Year. So Marines technically will only be able to receive $175x3=$525 for one class and have no more than $350 to use for a second class... in the entire fiscal year. With community colleges in the area that have online (even 8 week courses online) and they're dirt cheap... Marines most likely will leave APU/AMU and go the cheaper route. This is going to happen (if it hasn't already) to a LOT of for-profit schools who were charging $250/credit hour...

  • Report this Comment On March 18, 2014, at 3:28 AM, JillyMonroe wrote:

    tfgrhn

  • Report this Comment On March 18, 2014, at 3:31 AM, JillyMonroe wrote:

    Grateful to have come across this blog, I gained more info about profit sharing for education. According to review, the public education system in the United States grew out of an economy based upon single income workers, zero competition from outside markets for internal education consumers, and more manufacturing jobs than service jobs. -Jilly essaymama.com

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