MOTLEY FOOL: Why Apollo Education Group Inc Fell 27% in June
Career College Central Summary:
What: After dropping another 22% last month, University of Phoenix parent company Apollo Education Group (NASDAQ:APOL) has seen its shares trade down more than 60% year-to-date.
So what: As you can see in the chart…the huge decline is concentrated in basically three sharp drops, corresponding with bad news that has become the norm at for-profit colleges: fewer and fewer students are choosing to attend them. Last quarter, the University of Phoenix saw both new student and current enrollment fall almost 15%, making a direct impact on both the top and bottom lines.
Total revenue decreased 14%, while operating income fell 22% for the quarter, largely due to increased discounting of tuitions.
Now what: Frankly, it is hard to see things getting better before they get even worse for the entire sector. An improving jobs market, increasing wages, and a strengthening economy all have been key factors behind the decline in attendance at all for-profit colleges — not just the University of Phoenix — which rely on more non-traditional students for a bigger portion of their enrollment. If these potential students are finding jobs, then for-profit colleges will continue to lose out.
There is more to be concerned about, too. As much as new student enrollment declines are concerning, there is evidence that student retention is a growing problem. On the most recent earnings call, interim CFO Joseph D'Amico said that "retention-based scholarships" — industry-speak for a tuition cut to retain student enrollment — increased discounts by about one percentage point last quarter (about 8% more than the company was expecting) and that upwards trend was likely to hold true for the rest of the year.
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