NEW YORK (TheStreet) -- If you're a Bridgepoint (BPI) investor, Monday's press release must have left you feeling like you bombed your final exam before graduation. If you haven't already panicked out of your position, you could feel better when Bridgepoint bounces back likely later in the week.Online schools Apollo Group ( APOL), Corinthian Colleges ( COCO), DeVry ( DV) and Education Management ( EDMC) have sat in detention for the past three years. Once considered a safe investment sector during recession, the education space has been forced to wear a dunce cap repeatedly. Bridgepoint isn't the first school to fall on accreditation fear or failings. The whole industry took a turn for the worse when scandals over recruiting practices destroyed half the market capitalization of the industry. Bridgepoint has lost about 33% of its market cap since Friday's close as a result of Western Association of Schools and Colleges' move to deny accreditation to Bridgepoint's Ashford University. Fortunately for Ashford and Bridgepoint's investors, Ashford is already accredited by the Higher Learning Commission. While Bridgepoint clearly has its homework cut out for it at the Ashford location for the next few years, the next exam is not until 2014 or 2015. That's plenty of time for Bridgepoint to make the changes needed to satisfy the ubber academia's requirements, which include improving student retention and full-time faculty. Unfortunately, what captured Wall Street's attention Monday is fear of what may or may not happen in two or more years. That's a lifetime in the corporate world, and a fear that appears to be overblown based on other statements by the Western Association of Schools and Colleges. WASC acknowledged efforts by Bridgepoint to address the issues and said more time is needed to assess their effectiveness. Bridgepoint already was trading below the widely followed 200-day moving average, adding fuel to liquidation based on chart technicals. The chart to watch for Bridgepoint is the weekly chart, where you can find this week's drop moving through the 90-week moving average and support at $18. Both these levels offer support and resistance. More importantly, both offer a history of reactions with price retracements that suggest Bridgepoint will once again trade above $18 soon.
Revenue and earnings are bright spots for Bridgepoint. Bridgepoint is on the honor roll with revenue quickly nearing $1 billion dollars annually, an improvement of 9.2% over last year. Based on revenue and an apocalyptic future price-to-earnings ratio of 5, it appears the selloff is beyond reasonable and likely short-lived. The industry-wide earnings ratio is estimated at near 20, with Apollo, DeVry and Corinthian near 10. Corinthian missed by a penny on May 3 when it reported quarterly earnings of 15 cents a share. Apollo reported $1.20 in earnings on June 25, beating estimates by 23 cents. Bridgepoint's next earnings release is scheduled for August 7. Two days later, DeVry reports, and we should have a very good idea of what to expect. As a result, expect increased volatility for DeVry through earnings. Insiders hold an abundance of shares and didn't sell enough in the previous six months to develop a clear bias. I like to see management and investors interests aligned. With Bridgepoint, I can say that's the case.
Visa was able to mitigate investor fears just like Bridgepoint will. Can Bridgepoint's share price double like Visa's did in less than two years? I would not be surprised, given the fact that Bridgepoint has traded near $28 a share within the last six months. Visa demonstrates that when a company with good fundamentals is facing a "one-off" negative headline you should not panic. It's the epitome of why investors must buy when there is blood in the streets. Bargain hunters and short sellers covering positions could push the price up quickly in relation to the gap-down price this week. Looking at the chart, I expect short-term resistance near $16 and again at $18. Round numbers often attract like a price magnet and then repel, causing a bounce. Expect a lot of volume to trade near $14 and $15 a share, but also be prepared for bargain hunters to start positions under $14 as an entry. Bridgepoint doesn't have debt (relative to the cash on hand), and the price-to-earnings ratio is a super bargain. Bridgepoint doesn't pay a dividend, and, with the upcoming wealth destroying dividend tax increase expected to begin in 2013, a dividend isn't a net positive any longer.