Full disclosure: I have a long position in APOL and so obviously have a self interest here. But I do think the company's fundamentals are good and its market share strong. There are some lingering issues -- expenses and possible regulatory overhang. But they haven't given sign that there are going to be problems with the quarter. And so I remain bullish.
That said, I'm looking for insight from the rest of you -- including the shorts. Please, no flames. If you disagree, that's fine. But let's keep it civil. We're all trying to profit.
APOL has an extreme amount of volitility over time. On any given *day* it may move up or down or *both* by anywhere from .25% to 1%. That amount of movement is purely psychologically driven. There is no economic reason or cause that would justify such drastic changes in the market worth of the company.
From a long term perspective it has trended upwards at an incredible clip. With two exceptions: First, from the fall of 1998 to the beginning of 2000 it trended downward, and of course since early August of 2004 it has trended downward on average. But a long run analysis shows that overall it is way up.
It is extremely doubtful - actually impossible - that any company (regardless of sector or business plan) could continue this pace of expansion. The fundamental concept of economics is scarcity and at some point APOL will bump up against declining marginal returns to additional investment/expansion.
What is unknown is: 1. How long that will take to happen. 2. What a reasonable long run price path is for this stock. At some point APOL's shareholders will realize that they aren't getting much additional benefit by having all earnings plowed back into the company. At that point APOL will start paying a dividend - just like Microsoft - and it remains to be seen what kind of a stock price growth path the combination of steady growth and a dividend would support.
My long term position is still to hold (and continue to buy on occassion), but given the inherent jumpiness of this stock's price I am also open to shortrun option trades (both short and long positions) to generate income.
As you mentioned the company itself has demonstrated strong growth, it is also the leading innovator in its sector, and is the largest firm in its sector. Overall it looks very good - the questions are: First, whether this rosey outlook supports a current price of $65, $75, or $85? And second, what kind of growth over time in share price do the company's fundamentals support? Currently $75 - or a bit higher - seems reasonable to me; and a, less than historically observed, 12 to 15% annual growth in share price over time (for at least 5 years or so) seems reasonable given that the company itself continues to growth much faster than that rate.