Education Industry

[winston]

Strayer Education, New Oriental Tumble On For-Profit Schools' Weak Guidance
BY BRAD KELLY, INVESTOR'S BUSINESS DAILY

School stocks retreated Thursday as two for-profit educators gave guidance below Wall Street views.

Strayer Education (STRA) said earnings rose 28% to $1.71 a share, a penny above estimates. Revenue climbed 28% to $114.3 million, the best in years, on higher student enrollment and tuition fees.

But shares tumbled 18% to 186.07 after the company projected first-quarter EPS of $1.96 to $1.98, just shy of analysts' forecasts for $1.99.

Meanwhile, New Oriental Education (EDU), the largest provider of private educational services in China, cut its revenue outlook for the current third quarter, citing the country's sluggish economy. Its shares slid 23% after hitting their lowest level in nearly two years.

The Chinese for-profit school now expects revenue of $62 million to $65 million. Back on Jan. 19 it predicted $65.5 million to $67.5 million. But New Oriental believes that this is a short-term effect because Chinese families place a high priority on their kids' educations.

"The economic downturn in China has had a greater than anticipated effect on (our) cash proceeds — cash collected from students in advance for course enrollments — over the past several weeks," said New Oriental CFO Louis Hsieh.

Typically in a weak economy, analysts view for-profit schools as defensive, countercyclical plays. Working adults are more apt to go back to school during tough times to beef up their resume and skills.

While CEO Robert Silberman has always insisted that Strayer's business isn't cyclical, he finally hinted there was a little increase in demand due to the recession.

"The economic downturn doesn't hurt us and there was a slightly higher propensity to enrollment," he said in a post-earnings conference call. "But I wouldn't hang my hat on that."

Silberman believes the true tail wind to enrollment growth has been the U.S. shift from a manufacturing-based economy to a knowledge-based one, where education becomes so much more important.

Total enrollment at Strayer University increased 22% to 45,697 students during the winter term. New student registration rose 20%, while continuing student enrollment grew 23%. Online enrollment rose 25% to 27,822.

"Strayer's guidance was going to drive the stock down, but I think the management team did a good job on the conference call to mute some of the concerns out there," said Signal Hill analyst Trace Urdan. "Overall, Strayer had a solid quarter."

Strayer opened two campuses during Q4 and will open three more during the spring semester. It has now opened five of the 11 new campuses planned for 2009.

Strayer also launched its second global online operations center during the quarter, which it said is equal to opening five new campuses. That will compress margins over the next two quarters.

"There is a lot of opportunity in expanding online offerings," Urdan said. "The competition for online enrollment is heating up, and Strayer doesn't want to have its head in the sand."

Companies such as GM (GM) and Sprint (S) have recently suspended tuition reimbursement programs. Strayer gets 25% of its revenue from such reimbursements. But management said it saw no negative impact from the downturn.

The company generates 70% of revenue from Title IV programs that offer guaranteed loans.

The bad news from Strayer and New Oriental hurt many rivals' shares. DeVry (DV) fell 4% and ITT Educational (ESI) slid 5%. Apollo Group (APOL), which operates the University of Phoenix, nearly erased all of its losses by the close.

Capella Education (CPLA) said Q4 profit rose 29%, beating forecasts. But its revenue forecast for Q1 2009 is below views. Still, Capella's shares rallied to climb 2.5%.

[LenaHuat]

2day, CityDevelopmentLtd's subsidiary sold its 50% stake in MindChamps Education. I really wonder what the buzz abt MindChamps is all abt.

[winston]

Education Stocks Are About to Collapse By Tom Dyson, Daily Wealth

Jim Chanos is the world's best short seller.

Most investors like to pick stocks they think will rise. Short sellers pick stocks they think will fall. Enron is Chanos' most famous short sale. Chanos knew Enron was a broken company before the stock market. His "short sale" of Enron made a fortune when the stock collapsed... and made him famous on Wall Street.

Jim Chanos is a smart guy and he's made a lot of money for his investors. Here at DailyWealth, we always pay attention to his investment ideas... as they are almost always profitable.

Right now, Jim Chanos is selling short the for-profit education business.

The for-profit education industry includes companies like DeVry, ITT Tech, and Career Education. These companies charge tuition fees for graduate and post-graduate training in technology and business.

"Kids are graduating from these schools," Chanos says, "with associate and bachelor degrees... and running up $30,000... $40,000... $50,000... $60,000 in debt. In many cases, the cost of these diplomas is the cost of Ivy League diplomas. Some of these kids don't find themselves any more employable with one of these degrees than beforehand."

The federal government offers subsidized loans to help students attend these institutions... But the problem is, the fees these schools charge are so high, students need to augment their government loans with private financing. Many of these private loans defaulted in the credit crunch... and it's created a large financial mess.

Chanos thinks these firms are going to have difficulty recruiting students now that the students can't get financing to pay the high tuition fees... and he's shorted the stocks of several of the companies in the sector.

There's no ETF for the secondary education sector... But check out Apollo (APOL). As my colleague Brian Hunt pointed out yesterday, Apollo is the "bell cow" of the for-profit education industry. With a market capitalization of $11 billion, Apollo is an excellent proxy for what's going on in the sector as a whole.

On April 1, Apollo reported solid quarterly earnings. Revenues were up 26% year over year, and Apollo beat analysts' estimates of both sales and profits. The stock plummeted 16% on high trading volume.

As I explained on Monday, it's an incredibly bearish sign when a stock reports decent earnings and gets clobbered for its trouble. It shows the line of least resistance is down.

Last week, the stock market showed strength. The S&P 500 rose 5% on Wednesday and Thursday. While the bulls were charging stocks higher, Apollo's stock was declining 3%. It may not sound like much, but this divergence shows immense weakness in Apollo's stock.

Since its big earnings drop, Apollo is down 9% in the seven trading sessions. Most importantly... the 22% total decline has led to a new five-month low in Apollo's stock price.

This is a textbook example of a stock "acting poorly." The charts of other for-profit educators like DeVry, ITT, Career Education, and Corinthian Colleges are showing same patterns of poor action and multimonth breakdowns.

The world's best short seller is bearish on for-profit education. And the stock prices are breaking to new lows as the S&P rises... It's likely this sector will see a big move lower.

[winston]

Election Outcome: Educational Services

The regulatory overhaul in the federal student financial aid program, we believe, has negatively impacted sector fundamentals and resulted in sector stock prices moving down dramatically over the past two to three years.

We believe the sector already reflects the impact of an Obama victory, and we see further downside risks.

A Romney victory would likely help the shares initially, but continued budget concerns could weigh over time.


Source: CS

[winston]

The Most Important Education Technology in 200 Years

Students anywhere are being offered free instruction online. What will that do to the trillion-dollar education business?

Agarwal believes that education is about to change dramatically. The reason is the power of the Web and its associated data-crunching technologies.

Thanks to these changes, it’s now possible to stream video classes with sophisticated interactive elements, and researchers can scoop up student data that could help them make teaching more effective.

The technology is powerful, fairly cheap, and global in its reach. EdX has said it hopes to teach a billion students.

http://www.technologyreview.com/news/50 ... 200-years/

[winston]

Future of Education is At Hand: Online, Accredited, Affordable, Useful

http://globaleconomicanalysis.blogspot. ... nline.html

[winston]

China: Education (OVERWEIGHT) - Investing in the future

PRC fundamental education industry was worth Rmb2tr in 2015 annual revenue and is expected to grow with increasing investment and private school development.

Our conversation with an education expert confirms that international education demand is rising and there has been no negative impact from the slowing economy.

We see private education students rising from 35m in 2014 to 50m by 2019.

We expect most upside from international schools allowed to teach PRC nationals. Our top pick is #1 private school player, Maple Leaf Education (1317 HK).

Source: CIMB

[winston]

The student loan crisis is even worse than we knew

Source: Daily Crux

http://thecrux.com/the-student-loan-cri ... n-we-knew/

[winston]

China bans off-campus tutoring in education overhaul that sets off market rout among dozens of listed edtech platforms

Local authorities will ban holiday and weekend tutoring and will no longer approve tuition centres, according to a document from the State Council

Companies that operate edtech platforms will not be allowed to raise capital through initial public offerings

Listed companies and overseas investors are barred from investing, or acquiring stakes, in education firms that teach school curriculum.

The booming industry – estimated at 811 billion yuan (US$125 billion) in 2021 by Frost & Sullivan
.
Language training is one of the fastest-growing segments in tutoring, ballooning by 13 per cent to 619.1 billion yuan in 2019 from 377.5 million yuan in 2015.

Source: SCMP

https://www.scmp.com/tech/policy/articl ... rout-among

[winston]

China considers turning tutoring companies into non-profits

In rules currently being mulled, the platforms will likely no longer be allowed to raise capital or go public, the people said, asking to not be identified because the information is not public.

Listed firms will also probably no longer be allowed to invest in or acquire education firms teaching school subjects, while foreign capital will also be barred from the sector.

Local regulators will stop approving new after-school education firms seeking to offer tutoring on China’s compulsory syllabus and require extra scrutiny of existing online platforms, the people said. Vacation and weekend tutoring on school subjects will also be banned.

Source: Bloomberg

https://www.theedgemarkets.com/article/ ... nonprofits