For-profit education companies on the stock markets have taken an early beating Tuesday in the wake of a gloomy forecast by DeVry (NYSE:DV). Many of the top for-profit education stocks are caught in the undertow. Monday, DeVry modified its earnings forecast significantly lower, and the stock has been beaten to a pulp ever since – down nearly 28 percent from Monday’s close, to $20 per share.
As is usual with many industries, all it takes is one company to get (or give) a bad piece of news, and the entire industry suffers for it. Several other similar companies, like Apollo Group (NYSE:APOL) – down 3.5 percent; ITT Education Servies (NYSE:ESI) – down more than 7 percent; Strayer Education (NYSE:STRA) – down 8 percent; Grand Canyon Education (NYSE:LOPE) – down 3 percent; and Washington Post Co. (NYSE:WPO) – down 2 percent, are feeling the pushback.
DeVry is the top-traded for-profit education stock on the Street, with more than 2 million shares trading hands daily. APOL has the largest market cap at $3.17 billion.
DV stock has been hammered since it announced a downgrade in its FQ4 forecast to an EPS of 43-46 cents per share on revenue of $500-510 million, down from consensus estimates of 78 cents per share on $516 million in revenue. The company stated that increased scholarship use and higher operational expenses as the cause for the downgrade.
This news is likely not being received well with several hedge funds, which have stepped up their stakes in DV stock in recent reports. At the end of March, for example, Ken Griffin’s Citadel Investment Group had increased its stock stake in DeVry by 88 percent to a value of $35.3 million, and Lee Hobson’s Highside Capital Management posted #30 million in new investment in DV stock by the end of the first quarter of 2011. John W. Rogers’ Ariel Investments had increased its stake by 28 percent to nearly $144 million to lead all hedges.
With APOL stock, Citadel increased its stake by more than 500 times during the first quarter to $83 million and Andrew Midler’s Standard Pacific Capital added 163 percent to its share hold to a value of nearly $79 million.