Apollo Outlook Weighs on School Stocks
Shares of Apollo Group(APOL_) plummeted more than 20% in the first minutes of trading Thursday, dragging much of the for-profit education sector with it.
Apollo Group, parent company of The University of Phoenix and other for-profit schools, posted better-than-expected quarterly earnings after the closing bell Wednesday, but warned that enrollment would be down more than 40% in fiscal 2011's first and second quarters.
Apollo also warned it would fall out of compliance with what is called the 90:10 rule in fiscal 2012. The rule stipulates that no more than 90% of a for-profit education provider's revenue may be generated from Department of Education's federal student aid program.
Free falling stocks: APOL, COCO, WPO, CECO, DV, STRA, ESI, EDMC
Apollo and others will fail to comply with the 90:10 because the government took over the private lending industry with the healthcare bill. Try as I might to avoid expressing a political point of view on this, I can't: Whoever wrote the Healthcare bill knew he started a domino effect against the free market in industries other than just the health care.
Even if the stock market rises 50% this year, it's highly risky to invest in individual stocks and sectors with this administration.
Hope for better days.
Update: For-profit schools reel as rules affect enrollment
-- The nation's largest for-profit college is changing admission practices to satisfy new government regulations aimed at preventing students from leaving school with staggering debt they can't repay, but the result may be that fewer lower-income students will gain entry to class.Intentional meddling by the government. You want higher education? Your unelected officials decided that you're too poor to get ahead in life. Unbelievable!