rjm77me's Blog : Educational stocks are showing selling exhaustion

Thanks rjm77me!


http://www.peopleandpicks.com/commentary/3338402#3387329

Apollo Group: Headlines earlier that caused for-profit education stocks to sink were from a letter that was sent by DoE Secretary Duncan to Iowa Senator Harkin (39.19 -1.28) : The data has not been released however and we confirmed with representatives from the Dept of Education that when it is, it will apear on its website (home page

Thanks! When education stocks change they do so quickly and can make for nice ST gains.

FYI
Corinthian's Enrollment Likely to Sufferby Todd Young | 08-20-10 | 3:45PM
During Corinthian Colleges' fourth-quarter and year-end conference call, management noted a few major areas of concern. These issues will likely have a significant downward impact on the company's enrollment, revenue, and profitability. We are leaving Corinthian under review and anticipate a significant downward revision to our fair value estimate. Given the company's weak position within the education space, we think investors would be wise to look elsewhere in the industry for potential buying opportunities.

Increased regulatory oversight in the industry could limit the company's ability to grow. Adding to this tough operating environment, Corinthian has three company-specific issues that will put even more pressure on its results.

First, one of the company's colleges, which was on probation, may lose its accreditation. The accrediting body's evaluation team recommended a withdrawal of the schools accreditation. The school represents about 5% of the company's population. Final determination is expected in November, after which Corinthian could appeal. Given that the industry is under heavy watch by the Department of Education, Congress, and the media, we are doubtful that the accrediting body will reverse the evaluation team's recommendation. However, final notice could drag out for a few months during the appeals process.

Second, the company now expects three schools (representing 6%-7% of revenue) to be above the cohort default rate measure of 25% for three consecutive years. The company had previously stated that it did not think any school would fail this milestone. These schools will likely lose access to government financial aid for their students. While access will not be lost until 2012, according to management, appeals relating to this issue are rare. Therefore, we anticipate that the company's enrollment will decrease, since the lack of financial aid access will all but close these locations down.

Third, in light of the company's poor cohort default rates, Corinthian has decided to stop serving new Ability to Benefit, or ABT, students. These students lack a high school diploma or equivalent but can attend higher education under the government's ABT program. Given that these students drop out more often and are less likely to repay loans, this is a necessary move. These students, which are served by only a few of the company's publicly traded competitors, represent roughly 15% of the company's student population. Management also estimates that this move will reduce revenue by roughly $120 million next year.

Regarding the loss of ABT students, management was unable to give an estimate of the impact on margins. However, they noted that given the relatively high fixed-cost structure in the near term, the impact could be high. We anticipate significant margin deterioration due to the loss of ABT students. Additionally, given the other issues mentioned above, continued margin pressure is likely to persist for the next few years.

Thanks for great info.
In retrospect, the stocks showed selling exhaustion for a day or so.
The whole sector took a big dive.
Right now do not know if it is good time to go short with real money