That led Piper Jaffray analyst Peter P. Appert to slash his price target on Strayer shares by $17 to $119, maintaining a neutral rating on the stock.
Despite Apollo's drop in students starts, it could be better positioned relative to its education peers because the decline followed changes in the company's internal regulation. Strayer, meanwhile, saw a drop in student enrollment because of external factors beyond its control.
"While the company and industry are going through a transition, Apollo may be ahead of the curve based on its initiatives -- however painful they may be to near-term results," noted BMO Capital Markets analyst Jeff Silber.Strayer's enrollment update dragged much of the education sector sharply lower in Monday's trading but many industry players rebounded somewhat in Tuesday's session. Everest Colleges parent Corinthian Colleges (COCO) closed higher by 1.5%. DeVry (DV) gained 4.7%, Lincoln Educational Services (LINC) 1.3% and ITT Educational Services (ESI) jumped 7.4%. Grand Canyon Education (LOPE) closed the day unchanged at $18.05. Strayer remained in negative territory, closing down 0.2%. Capella Education (CPLA) was down 1.4%. A number of schools in the education sector have also offered cautionary statements about falling student enrollment growth in recent months. On Oct. 14 Apollo warned that enrollment would be down more than 40% in fiscal 2011's first and second quarters. Apollo withdrew its outlook and warned that it would fall out of compliance with the so-called 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 the Department of Education's federal student aid program. Apollo would have to increase its tuition rates if access to federal aid is cut off, further inhibiting student enrollment. The warning led a sector selloff and was echoed by school stock peers such as Corinthian Colleges, Capella Education and ITT Educational Services.
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