Private Education Stocks Lower On Cautious Barron's Article (ESI, APOL, DV, COCO)
Private education stocks are weaker today after a cautious Barron's piece on the sector. Barron's thinks investors may now be too optimistic about the stocks. Stocks mentioned in the piece include ITT Educational Services (NYSE: ESI) -13%, Apollo Group (Nasdaq: APOL) -6%, Devry (NYSE: DV) -2.5% and Corinthian Colleges (Nasdaq: COCO) -7.7%.
Barron's notes the bullish case on the stock centers around the thesis that with high unemployment, millions will be seeking new training. In addition, the companies are mostly debt-free and the charts are showing nice up-trends. Also, the Obama administration is committed to education.
Barron's notes that valuations in the group are now near or above 20 times projected 2009 earnings and are straining toward the upper end of their historical ranges. They also note that the companies are dependant on government-backed student loans, which is an area that has drawn much scorn as rife with manipulation. They also suggest the Obama administration may not be as friendly as the Bush administration's toward for-profit educators. In addition, Barron's said the the stocks are likely at risk of any subtle alteration in investor mindset about the employment market or other consumer dynamics. They think there is evidence that fund managers are "hiding" in the group.
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