Apollo Group (NASAQ:APOL): Actionable Short Alert!

From Notable Calls

CSFB is out with new (negative) info on Apollo Group (NASAQ: APOL) noting the shares rallied yesterday in reaction, they believe, to news of the dismissal of the lawsuit filed December in Arkansas alleging that Apollo wrongfully returned Title IV funds to the Department of Education to manage down cohort default rates; they think some investors had believed that the dismissal meant that the issue had been put to bed.

Industry sources lead CSFB to think that the lawsuit is likely to be refiled in the coming days in Phoenix.

Although they expect news of a refiling to weigh on APOL shares short term and potentially increase volatility in coming weeks, they continue to like APOL shares and would view significant weakness as a buying opportunity. Sector history makes the firm think that, even if some wrongdoing were found by the Department of Education, resulting financial penalties would not likely be large enough to materially hurt Apollo's enterprise value as long as Apollo worked with the Department to ensure compliance going forward.

Further, they are optimistic that 09 enrollment and earnings upside (vs CS and consensus ests) may result from the combination of the weak economy and continued expense management initiatives.

Notablecalls: This is new info. Kudos to CSFB people. In light of this I'm calling APOL an ACTIONABLE SHORT. I'm surprised they didn't downgrade the stock.

I think the stock can go below $84 level this.

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