Credit Suisse Hits Pause Button On DeVry, Downgrades To Neutral

DeVry Education Group Inc DV has announced the departure of CFO Tim Wiggins, who will be replaced by the company’s former treasurer, Patrick Unzicker.

Credit Suisse’s Trace Urdan downgraded the rating on the company from Outperform to Neutral, while lowering the price target from $25 to $17.

CFO Wiggins’ Departure

Following the announcement, Urdan said, “[W]e no longer feel confident in our investment thesis, which was predicated in part on the graceful cost-cutting program instituted and supervised by Wiggins.”

While believing that there was value in the sum of the parts of DeVry Education Group, the analyst stated that the departure of someone “as capable and insightful as Wiggins” was a meaningful blow to the confidence in the investment case.

Regulatory Risks

“The departure of the CEO and the CFO and the purchase of a $40 million revenue business for $330 million in cash all within the last week has elevated the company’s operational and regulatory risks significantly in our view,” according to the Credit Suisse report.

Urdan believes that the company might not have the cash resources to settle with the FTC, and now it was also vulnerable to any new regulatory threat that might emerge as a result or independent of the FTC suit.

“Furthermore, the Department of Education is likely to publish new draft rules this summer that would require the company to post a letter of credit for some portion of its prospective regulatory liability, which could exacerbate the issue,” the analyst added.