A couple of K12 Inc. stock downgrades


by David Safier

K12 Inc. stocks have been soaring lately, and it's been recommended as a strong buy. But a few analysts are changing their tunes.

Baird downgraded K12, Inc. (NYSE: LRN) from Outperform to Neutral.

BMO Capital reduces its rating on K12 (LRN) to Market Perform from Outperform.

The Baird story didn't give reasons for the change, but BMO was more specific: "The investment firm chops its price target almost in half to $22 after taking in the trend of slowing enrollment at the education concern." And, "LRN -11.6% premarket."

K12 Inc. has received a flurry of bad press lately. Hedge fund manager Whitney Tilson has published a long, detailed screed about why he's shorting K12 stock big time. And Travis Manning, an Idaho teacher and activist, wrote a column linking my 2008 investigation into K12's practice of outsourcing student essays to India to current corporate practices. Progressive educator and historian Diane Ravitch has picked up the story as well. I'm sure those negative stories had an impact on the downgrades.

Meanwhile, K12 Inc. put out a rush announcement that it's planning a Thursday conference call "to discuss full fiscal year 2014 guidance." Apparently, "enrollments fell short of internal expectations." Uh oh.

UH-OH UPDATE: Yesterday, K12 Inc.'s stock (LRN) was at $28.59. As of noon eastern time today, the price has tumbled to $17.40. Here's a chart of the stock prices over the past 5 days.

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