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The Associated Press May 5, 2010, 4:50PM ET

Sector Wrap: For-profit schools shares bounce back

Shares of for-profit schools regained some ground Wednesday, as analysts said a documentary about the industry that aired Tuesday night was not as critical as investors had feared.

The documentary, "College Inc.," aired on the PBS television program Frontline.

A review in The Chronicle of Higher Education, a trade publication, ahead of the documentary had said it focused on high tuition, student debt loads and aid defaults and heavy-handed recruiting. The review said the documentary portrayed a number of schools in a negative light, including Bridgepoint Education Inc.'s Ashford University, Education Management Corp.'s Argosy University chain, the University of Phoenix, owned by Apollo Group Inc., and Corinthian Colleges Inc.'s Everest Colleges.

Shares of for-profit schools dropped steeply Tuesday, which a Wedbush analyst attributed to the anticipation of bad publicity from the documentary.

On Wednesday, however, Sterne Agee analyst Arvind Bhatia said that while College Inc. did highlight the problems mentioned in the Chronicle's review, "at the end of the day, we felt the expose was perhaps not as negative as one might have expected."

The documentary interviewed entrepreneurs of the sector, Education Secretary Arne Duncan, some "disgruntled" students and some satisfied students, and former enrollment counselors who spoke about the pressure they had been under to pump up enrollments, analysts said.

Duncan did say that the government was "thinking through what additional steps we need to take" to counteract bad practices in the industry, noted Wedbush analyst Ariel Sokol. The prospect of increased regulation and criticism of increasing student-loan default rates have weighed on stocks of the schools since President Barack Obama took office.

But the documentary was not a "hatchet job," and the anecdotes used as examples of for-profit schools' problems did not offer a "compelling analysis" of the entire sector, Sokol wrote. Grand Canyon Education Inc. even came off "looking rather well," he said.

Bridgepoint shares rose 99 cents, or 4.2 percent, to close at $24.66; Education Management added 62 cents, or 3 percent, to end at $21; Apollo rose 89 cents to $56.99; Grand Canyon gained 37 cents to settle at $25.40. Shares of DeVry Inc., Lincoln Educational Services, Career Education Corp. and ITT Educational Services Inc. also rose.

Corinthian fell 21 cents to $14.83.

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