Apollo: Sometimes a Review is Just a Review
Career College Central Summary:
Shares of Apollo (APOL) have fallen after the company disclosed that the Department of Education would be conducting a review of its course programs at the University of Phoenix. Investors are uncertain about the for-profit education space, but we do not see this Program Review specifically as a major risk.
Apollo filed an 8-K to disclose that it has been informed by the Department of Education that the Department intends to conduct an ordinary course program review at the University of Phoenix beginning August 4, 2014.
The review will cover federal financial aid years 2012-2013 and 2013-2014 and other miscellaneous regulations. We see this as normal practice for the Department of Education and it follows reviews in 2010, 2011 and 2012.
While the span between reviews has narrowed over the past few years (from every ~5 years before 2009), it seems the Department is simply delivering on its promise to monitor the industry more closely. We do not believe this program review was initiated as a result of any particular problems, but is simply an ordinary means of monitoring the industry.
Despite the after-hours volatility, we maintain our EW rating and see no fundamental reason for a large move in the stock tomorrow. Of course, there are good reasons to be concerned about the for-profit education space.
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