PXED Stock: University of Phoenix Trades at 7x Earnings — and Fears One Number

Phoenix Education Partners (PXED) Q3 FY2026 — Phoenix Education Partners (parent of the University of Phoenix) reported flat Q3 revenue of $271.8M, beat on adjusted EPS at $1.43, but cut its full-year revenue guide and saw margins compress — blaming AI-powered search for disrupting its student-recruitment funnel. The stock fell ~9.5% to ~$31. The single number that governs this stock: 88.6% of Phoenix's revenue comes from federal financial aid, and a law (the 90/10 Rule) caps that at 90%. It earns 28% margins sitting 1.4 points from a cliff its own filing says could make the business 'unsustainable.' That's why a debt-free cash machine with $269M of cash trades at ~7x forward earnings. Two twists: the reason it fell (AI-powered search breaking the enrollment funnel — one of the first companies where you can point to a P&L line moving because of how people use AI), and the tailwind nobody's pricing (the June 29 repeal of Gainful Employment, the rule built to punish for-profit colleges). Cheap, with an ignored tailwind and real tail risk — a SPECULATIVE BUY, fair value ~$40. THE CALL: SPECULATIVE BUY (3/5, CHEAP, WITH AN IGNORED TAILWIND) — base-case value ~$40 vs ~$31.29 today. What to watch: the enrollment funnel stabilizing as marketing adapts to AI search, the 90/10 percentage holding well below 90%, and whether Apollo floods the tiny float with a secondary Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.