November 7, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Higher One Holdings (NYSE: ONE ) are having a lower one of those days, dropping nearly 18% before settling into a 13% loss as of this writing after third-quarter earnings came in below expectations yesterday evening.
So what: The student-focused credit and checking account issuer was hurt by declining student enrollment growth, which produced weak adjusted EPS of $0.16 for the quarter. Revenue came in 6% higher, with a $51.2 result, but both results underperformed Wall Street's expectations. The consensus for EPS had been $0.20.
Higher One also offered weak full-year guidance, which was well under the $0.73 EPS analyst consensus at a range of $0.63 to $0.70. The company blamed stagnating college enrollment, which has leveled off after a multiyear boom following the financial crisis, for its underperformance.
Now what: Although enrollment trends are a bit beyond Higher One's control, its response to this shift was found lacking by JMP Securities, which downgraded the stock to a hold from its earlier outperform call. William Blair analyst Christopher Shutler also faulted Higher One for weak adoption of its OneAccount product. With both external and internal trends moving against it at present, Higher One investors may want to wait on the sidelines for better news.
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