Apollo Group (APOL) Can’t Rise From Ashes After Revenue Miss

Apollo Group Inc. (NASDAQ:APOL): The private education provider, best known as the operator of University of Phoenix, delivered a mixed earnings earnings report after the closing bell Tuesday, beating on bottom-line EPS expectations but falling short of revenue estimates. and received mixed reactions. Investors are focusing mostly on the revenue miss, as the stock is down 6% as of this writing on Wednesday.

EPS Results

Actual $1.05 vs. Expected $0.85
Decreased 12.5% year-to-year

Revenue Results

Actual $946.8M vs. Expected $$965.07M
Decreased 16.27% from year-earlier
Revenue increased 13.47% from $834.37 million in the previous quarter

Guidance

EPS Q4 2013: Actual $0.33 vs. Expected $0.34
EPS in current fiscal year: Actual $2.74 vs. Expected $2.72

Key Takeaways from Conference Call

CEO Greg Cappelli: “This is a time of extraordinary change in higher education. At Apollo Group we are creating a more nimble organization and re-engineering our learning solutions to better support our student’s needs and meet the demands of employers. We are focused on making the necessary changes to deliver an improved set of educational offerings.”

Taking a Look at the Chart

Pattern: Downtrend

Even during the depths of the financial crisis, for-profit education companies like Apollo Group (APOL) were flying high. In fact, during January 2009, two months before US markets put in their infamous March bottom, APOL was trading at 52-week highs of $90. Since then, APOL’s stock has seen a precipitous fall, losing more than 80% of its value while the broad market indices have roared back to all-time highs.

There is nothing on the chart, or in the revenue numbers, to suggest APOL is near a turnaround. In early 2012 the stock tried to break out of its multi-year downtrend, but the breakout failed miserably and a new downtrend pivot point was created. Earlier this year, APOL tried to stop the bleeding and halt an accelerated downtrend, but it is once again headed back toward lows. The stock remains both a long- and short-term downtrend, and today’s big gap down on the weak revenue numbers will do nothing to change that.

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Potential Sympathy Trades – Stocks in the Same Sector

Corithian Colleges Inc., (NASDAQ:COCO)
DeVry Inc., (NYSE:DV)
Education Management Corporation. (NASDAQ:EDMC)

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