Deutsche Bank Cuts American Public Education To Hold

In a report published Wednesday, Deutsche Bank analysts downgraded the rating on

from Buy to Hold, while reducing the price target from $37 to $32, citing enrollment volatility and margin pressure. In the report Deutsche Bank noted, "Signs of stabilizing military enrollment trends have yet to surface while weak civilian student registration growth is expected to face further headwinds over the remainder of 2015. Margin pressure from ongoing IT investments and marketing spend will likely be exacerbated by the failed attempt to bring Fin Aid processing in-house." The EPS estimates for 1Q15 and 2015 have been reduced from $0.53 to $0.50 and from $2.54 to $2.27, respectively. "Visibility and demand are yet to improve in military enrollment trends and the 'new normal' in military is not being offset, as expected, by more stable civilian student trends," the analysts said. The pressure on new enrollment was expected to ease this year. However, the rollout of a few new initiatives is now expected to add civilian enrollment headwinds over the course of 2015. Weak recent enrollment results from DeVry (rated Buy) and Apollo (rated Hold) "make us feel less good about overall industry trends," the analysts said, while adding, "…data from Gray Reports suggest online program inquiries remain weaker than on-ground and slowed meaningfully in March."