APOL Short Squeeze finished. The stock is showing weakness, so good shorting oppty.
I would say APOL is a fantastic short at this juncture -- better than CECO because CECO's cash position improved dramatically overnight while APOL doesn't have the same "bricks & mortar" assets to sell as CECO. Meanwhile having a competitor such as CECO rich in cash to compete with APOL in the online edu space will be a net negative for APOL.
APOL just announced earnings Tuesday and now the stock went parabolic -- up 40% from a week ago during the past 2 days (Wed/Thurs).
The 40% run-up wiped out most shorts on margin and they have had to be forcibly liquidated immediately. That explains much of the past two days run-up. And when those forces are depleted (mostly yesterday and today), there is a lot of air below.
The majority of "buying" at these nosebleed levels was shorts covering.
Sure, APOL showed a surprise EPS upside in their report Tuesday, but their business is shrinking and student debt is at an all-time high and student loans are getting harder to get. There is nothing to like about APOL's business model at this point. Their EPS surprise was a one-time fluke related to cutting expenses because the education business is deteriorating.
Today or Monday, I would expect analysts to step out and state APOL has gone too far, too fast and it'll retrace back to $25 or below.
Trees don't grow to the sky.
From Motley Fool:
Flight of the Phoenix
Sometimes when a company soars after an earnings report, it just leaves you scratching your head. That's exactly what happened following the Tuesday evening release of for-profit educator Apollo Group's (NASDAQ: APOL ) fourth-quarter results.
On paper it was a pretty good quarter relative to what Wall Street had forecast. Apollo, the parent company of the University of Phoenix, delivered $845 million in revenue and a profit of $0.55 per share which was modestly higher than the $0.46 in EPS it reported in the year-ago period. Comparative
And Michael Tarkan analyst at CompassPoint issued a new SELL target of $20/share today..
Here's from Tarkan's Q3 analysis on APOL:
Compass Point reiterated a Sell rating and $15 price target on Apollo Group (NASDAQ: APOL) following Q3 results after the close. Despite the Q3 beat, revenue visibility continues to deteriorate, the firm said.
While the expenses outlook was a positive, there was a number of disconcerting developments from the quarter, analyst Compass Point Michael Tarkan noted: (1) a re-acceleration of new start pressure despite an increase in discounts and meaningfully lower comps; (2) cautious commentary around forward pricing; and (3) significant deterioration in free cash flow.
"After the 11th consecutive quarter of enrollment declines, we had expected the company would have been further along in its transition; yet, it appears as though management is still searching for the right formula for success," the analyst comments. "With continued enrollment pressure and a lack of pricing power, we remain cautious."
The firm upped FY13 EPS estimate to $2.93, from $2.70, to reflect the 3Q beat, however, they are cutting FY14 estimate to $1.75, from $2.00, to primarily reflect a weaker enrollment and revenue per student outlook.
Note also that in the past 3 days, about 35 million shares have traded. The most recent short interest as of Oct 15th showed about 20M shares short.
This would imply that most of the shorted shares were "burned off" in Wednesday's 28% blast-off after the earnings report.
Light volume today and lack of further upward movement would imply dwindling short-covering activity. In other words, the short squeeze is essentially over and it would be probably be safer to wade into a short position now than on the initial pop.