Apollo Group shares tumble after earnings miss

NEW YORK (Reuters) - Shares of for-profit education company Apollo Group Inc. (APOL.O: Quote, Profile, Research) tumbled as much as 30 percent on Friday after investors were stunned by worse-than-expected second-quarter results.

Shares of the parent of the University of Phoenix sank as low as $39.41, their lowest price since January 2007.

"Apollo reported very disappointing second-quarter results that signal a setback in its financial and margin turnaround," Lehman Brothers analyst Gary Bisbee wrote in a note to clients. "The largest culprit for the shortfall was a significant and unexpected spike in hiring of admissions and marketing personnel."

On Thursday after markets closed, the company reported a net loss for the second quarter of $32 million, or 19 cents a share, compared with net income of $60.3 million, or 35 cents a share, a year ago.

Excluding the charge of $168.4 million, the company earned $82.6 million, or 48 cents a share.

On that basis, analysts had expected the company to report earnings of 52 cents a share, according to Reuters Estimates.

Investment firm Stifel Nicolaus cut its price target to $66, from $84, and said that Apollo's enrollment starts need to improve for the company to meet its long-term growth targets.

Apollo reported enrollment starts up 6.2 percent, lower than Stifel's estimate of 9.5 percent.

Still, Stifel kept its "outperform" rating and said investors should use stock weakness as an opportunity to "build a position given expectations for growth, solid balance sheet and cash flow, and valuation."