Credit Suisse Downgrades For Profit Educators On Regulatory Concerns


We are downgrading Apollo Group (APOL), ITT Educational Services (ESI) and Lincoln Educations Services (LINC) to Neutral from Outperform mostly due to rising concerns that a more-challenging legal/regulatory environment could hinder longer-term growth and hold back valuation multiples near-term.


We now see a higher probability of a “worse scenario,” whereby, later this year, Congress or the DOE will contemplate legal or regulatory changes that could adversely impact for-profit education sector growth more significantly.


Further, we think the probability that the proposals will result in legal/regulatory changes is higher than it would have been in years past, as we think the Democratic administration, and Shireman specifically, is likely less sympathetic toward the for-profits than the Bush administration was.

– Credit Suisse Report, April 21

This is the kind of thing every investor has to start worrying about and paying attention to these day: Political risk!

Disclosure: Top Gun is long Apollo Group (APOL).

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