For-profit education stocks jumped in midday trading after Credit Suisse analyst Kelly Flynn upgraded Apollo Group (APOL) to Buy from Neutral and raised the company’s price target to $47 from $35.
“Shares have pulled back about 30% in the past 2 months on no company-specific news and are approaching 5 year lows. Meanwhile, our model work (particularly on orientation’s impact on seasonality) and channel checks into enrollment advisor productivity have increased our optimism that Apollo, after being the earliest of its peers to implement quality enhancing business model changes, may return to YoY starts growth for Q1 and FY12; we raised our estimates accordingly today.”
The enrollment picture has brightened considerably, Flynn argues.
“We now model +8.6% new student starts growth for FY12, +6.9% for Q1 and +5.0% for FY13; our model shows a return to revenue growth and positive margin leverage again in FY13. Our previous starts growth estimates were -8.7% for FY12, -6.9% for Q1, and +3.3% for FY13.”
Apollo shares jumped 8.1% to $42.06. Competitors are also rising, with Corinthian Colleges (COCO) up 10%.
No comments:
Post a Comment