What Happened?
Shares of higher education company Grand Canyon Education (NASDAQ: LOPE) fell 9% in the morning session after the company's third-quarter results revealed a significant decline in profit, largely due to a $35 million reserve set aside for a litigation settlement. While revenue grew 9.6% year on year to $261.1 million, boosted by a 3.5% increase in student enrollments, the top-line growth was completely overshadowed by plummeting profitability. The company's operating income fell 62.6%, and net income declined by nearly 60% from the prior year. The profit of $0.58 per share was a major disappointment, missing analysts' estimates by over 66%. Adding to investor concerns, Grand Canyon's full-year earnings guidance also fell short of Wall Street's expectations.
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What Is The Market Telling Us
Grand Canyon Education’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago when the stock dropped 5.3% on the news that the company announced it would pay $35 million to settle a lawsuit concerning its compensation practices. The settlement was part of a larger update on several legal matters. While some outcomes were positive, investors seemed to focus on the settlement's cost. In other developments, the Federal Trade Commission (FTC) dismissed its case against the company. Separately, the Department of Education (ED) reversed a $37.7 million fine related to claims that the company had misrepresented the costs of its doctoral programs. Despite this news, the stock's fall suggested that the financial impact of the $35 million payment, which is pending court approval, was the primary concern for the market.
Grand Canyon Education is flat since the beginning of the year, and at $162.09 per share, it is trading 26.5% below its 52-week high of $220.55 from October 2025. Investors who bought $1,000 worth of Grand Canyon Education’s shares 5 years ago would now be looking at an investment worth $1,981.
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