NEW BULLISH Plays
Strayer Education Inc. - STRA - close: 60.63 change: +1.69
Stop Loss: 57.45
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 21, 2015
Time Frame: Exit PRIOR to earnings in February
Average Daily Volume = 118 thousand
New Positions: Yes, see below
STRA has been outperforming the market since its bottomed in the low $40s in July this year. The stock is currently up about +45% from its 2015 lows.
STRA is in the services sector. According to the company, "Strayer Education, Inc. is an education services holding company that owns Strayer University. Strayer's mission is to make higher education achievable for working adults in today's economy. Strayer University is a proprietary institution of higher learning that offers undergraduate and graduate degree programs in business administration, accounting, information technology, education, health services administration, public administration, and criminal justice to working adult students. The University includes Strayer@Work, which serves corporate clients by delivering the next generation of performance improvement and workforce development. Strayer University also offers an executive MBA online and corporate training program through its Jack Welch Management Institute. The University is committed to providing an education that prepares working adult students for advancement in their careers and professional lives."
The for-profit education stocks have had a hard time in recent years. Accusations of predatory practices and misleading advertising has prompted tougher government oversight, new regulations, and fueled investor concerns (and lots of selling). Last year (July 2014) rival Corinthian Colleges unexpectedly shut their doors without warning and left students without a diploma and lots of student debt. Then several weeks ago, in early October, Apollo Education (APOL), the group that runs University of Phoenix, disclosed it was on probation with the Department of Defense and no longer allowed to recruit students on U.S. military installations. Shares of APOL plunged -10% on the headlines and it pressured the rest of the group lower.
STRA has managed to rally past these concerns, albeit after a very rough start to 2015. Looking at the last couple of years STRA soared in 2014 with a rally from the $33 area up to $80 by November 2014. That was the peak. STRA plunged from November 2014 until July 2015. Then suddenly shares reversed sharply higher following a better than expected earnings report.
It was July 29th when STRA announced their Q2 earnings results. Wall Street was expecting a profit of $0.99 a share on revenues of $108.1 million. STRA beat estimates with a profit of $1.11 a share. Revenues were down -2.6% but better than expected at $109.8 million. The company beat estimates again in October. STRA's Q3 results were $0.32 a share on revenues of $99.1 million, both above expectations.
The stock displayed relative strength last week. That relative strength continued today with a +2.8% gain and a breakout above round-number resistance at $60.00. If STRA can breakout past its recent intraday highs I wouldn't be surprised to see it rally toward $70. At the moment the point & figure chart is bearish but a rise above $62.00 will produce a new triple-top breakout buy signal.
Today's intraday high was $61.12. The November 30th intraday high was $61.62. Tonight we are suggesting a trigger to launch small positions at $62.05. We want to keep positions small to limit risk. STRA have proven over and over again that it can be a volatile stock. That's probably why the option spreads are so wide (and makes the options a little less appetizing).
A note on student debt - ballooning student debt has been a major financial concern for the U.S. over the last few years. Today student debt is about $1.2 trillion. That's more than auto loans or credit card debt and is only second to mortgage debt. Prognosticators have been warning about the bubble bursting in student debt for a while. It hasn't happened yet. I doubt it will happen in the next few weeks but investors should be aware that shares of STRA might be sensitive to any negative headlines regarding the subject.
Trigger @ $62.05 *small positions to limit risk!*
- Suggested Positions -
Buy STRA stock @ $62.05
- (or for more adventurous traders, try this option) -
Buy the APR $65 CALL (STRA160415C65) current ask $4.40
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike