Domestic, Financials, For-Profit, Investors, Required, University & College - Written by on Friday, August 19, 2011 7:00 - 0 Comments

Wall Street Round-Up Aug 10-18: The Bulls and the Bears of Online Education

Dear Readers,

Here’s a new feature in which we round-up views from Wall Street on the Online Education and Ed-Tech Space. We intend to expand this as we go. We welcome bank and research analysts in the ed tech space to send us their views/research at Paul@WiredAcademic.com.

Best, Paul Glader

The RoundUp from Wall Street, Aug. 10-18

  • Aug. 18 – Amy Junger, education analyst at Baird Equity Research dropped her price target on Xueda (currently trading at $7.33) to $11, from $12 after the company reported 2nd Quarter earnings. “We remain positive on Xueda’s long-term growth opportunity,” Junger writes in a note. “While 3Q guidance was below expectations due to internal near-term headwinds, we continue to recommend XUE to patient investors, given expectations of strong growth (>35% revenue and >50% EPS) over the next 3-5 years as well as attractive risk/reward.”
  • Aug. 12 – Amy Junger, education analyst at Baird Equity Research, downgrades Devry Inc. to Neutral, lowering her price target for the company to $53 from  $71. “We continue to view DeVry’s portfolio of brands positively and like the company’s long-term growth prospects, but the current environment is putting pressure on revenue and margins,” she writes, pointing to slow growth in 2012 and a pending CFO transition. She also points to fewer admissions and thinks that the regulatory environment will weigh on DeVry longer than executives suggest. She predicts margin contractions.
  • Aug. 12 – Ariel Sokol over at UBS Research holds fast to his “Buy” recommendation on DeVry, lowering his price target to $70 from $75. While new “starts” were down 26%, as Sokol agrees with management that it is the bottom of new start declines. “We acknowledge that starts growth at DeVry University and Carrington Colleges were below expectations,” he writes. “The challenging economic environment continues to negatively impact starts, as consumers are reluctant to take on debt.  In turn, it now appears that the company could post earnings lower than what the company had guided to but one quarter before.  The stock likely trades down 5-10% based on the lowered guidance.” He thinks the stock will trade higher in coming weeks as investors “opportunistically scoop up what remains a high cash flow generating company (10% of free cash flow yield). via Flickr and Creative Commons
  • Aug. 11 – Ariel Sokol at UBS Research in New York said QuinStreet (QNST) posted strong results in its fourth quarter earnings, although revenue was weak because of regulatory changes. QNST beat consensus revenue and EPS targets. But education revenue grew 12% compared to the same quarter a year ago, while it grew 26% in the third quarter compared to a year earlier. Sokol points out a “big unknown” how the U.S. Dept. of Ed rules that took effect July 1 will affect traditionally robust Q3 enrollment periods for QNST and the other colleges.
  • Aug. 10 – Ariel Sokol at UBS Research in New York removed APOL from its “least preferred” list. “We believe that shares of Apollo could trade at least in-line with peers,” writes Sokol in a note. “Given poor operating results and increased regulatory risk at multiple competitors, we suspect that investors seeking exposure to the postsecondary market may not prefer shares of APOL.”


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