Red-Flagging Adtalem's 'Material' Yet Overlooked Risk

With the for-profit education company reporting earnings Wednesday, will analysts bring it up? Probably not, but here's why it's important.

I’m old enough to remember when for-profit schools were screwed, and were front and center of much of my reporting going back to 2000, peaking around 10 years later when I was at CNBC….

What a great story it was.

And from the “history rhymes” department: It may very well be evolving into one again…

I’m going to keep my focus here very narrow, with a spotlight on Adtalem Global Education ATGE 0.00%↑, which announces FQ2 earnings tomorrow… zeroing in on a single overlooked risk. (For a deeper dive on the space, check out Brad Safalow at PAA Research, who at that time was an exceptional resource for me – he nailed it. He also was a rarity among analysts, with a willingness to red flag the space... on TV with me, no less. I haven’t talked to him in years, but I see he's still bearish, with Adtalem in his line of fire. I digress…)

Ghost of DeVry

For those of you who were around for the original for-profit follies, if the name Adtalem doesn’t ring a bell – let alone roll off the tongue – DeVry surely will. Adtalem is in large part the remnants of the old DeVry, which had a strong focus on vocational and technical training. It went on to pay $100 million to settle an FTC lawsuit over deceptive advertising.

It’s now a pure-play on healthcare, with schools that offer medical and veterinarian degrees, nursing degrees and mental health-related degrees.

Front-and-center among today’s risks for for-profit colleges are funding cuts tied to the One Big Beautiful Bill Act… which in turn impacts the all-important Title IV funding for higher ed. This has been well-covered in the media and investment world.

My interest in Adtalem was sparked by discussions with my friend and sometimes collaborator, Katherine Spurlock – a former short analyst and shortseller – who has been focused on education stocks for quite a while. She’s the “friend” I cited in my warning last August of issues at Stride LRN 0.00%↑, which went on to rise for a month or two before imploding. It’s now down around 44% since that first mention – and Katherine still thinks that even here the risk is high.

As it turns out, Katherine is as passionate about Adtalem as she is/was about Stride. But not just for the most obvious reasons.

Discounts … and More Discounts

Her concerns can be summed up in the chart below…