Capella Education (CPLA) - Bear of the Day

The regulations proposed by the Department of Education demonstrate potential risk that looms over the education sector currently. It might weigh upon students enrollment and Capella Education's (CPLA) profits.

Capella is witnessing falling students enrollment. We observe that the growth in enrollments in third-quarter 2010 has decelerated sequentially. After increasing 32.1% in the second quarter, the rate of growth in enrollment dropped to 25.7% in the third quarter. Capella now expects enrollment to rise within the range of 16% to 17% in the fourth quarter, reflecting a soft increase compared with previous quarters.

Following this, a negative sentiment is palpable among the analysts covering the stock leading to a downward revision in the Zacks Consensus Estimates. The dwindling prospects compelled us to downgrade our recommendation to Underperform.
 
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