K12 sinks after Wells Fargo downgrade on Colorado school concerns

theflyonthewall.com

K12 (LRN) is tumbling after Wells Fargo analyst Trace Urdan downgraded the stock to Market Perform from Outperform in a note to investors earlier today. One of the company's schools, Colorado Virtual Academy, is performing poorly, Urdan wrote. In fact, the school's weak results have become a problem for the school district in which it is currently charted, according to the analyst. As a result, the academy has tried to transfer its charter to "a quasi-state agency," Urdan reported. However, the institute's staff last week recommended that Colorado Virtual Academy's transfer application be denied, the analyst learned. While Urdan doesn't expect the school to close, he thinks it may be forced to adopt changes which would lower its margins. Although the school only generates about 3% of K12's margins, the problems it's facing raise troubling issues about the company, the analyst believes. In early trading, K12 fell $1.95, or 9.54%, to $18.50.

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