April 1 (Reuters) - Shares of Apollo Group Inc APOL.O fell as much as 16 percent Wednesday, a day after the education company said it would likely be subject to annual regulatory reviews and forecast lower sequential operating margin growth in the second half of 2009.
The U.S. Department of Education informally told Apollo, the parent company of the University of Phoenix, that it, along with other large universities, would likely be subject to annual focused program reviews, Chief Operating Officer Joe D'Amico said on a conference call Tuesday.
"Any time you see noise from the regulatory side, the group always overreacts and that is what is happening today," BMO Capital analyst Jeff Silber said.
Shares of Apollo's peers, such as DeVry DV.N and ITT Educational Services Inc ESI.N, were also down in late morning trade.
Robert Baird analyst Amy Junker downgraded Apollo to "hold" from "buy" on concerns about slower margin expansion and a rise in bad debt collection in the near future.
"While we still expect that our operating margin for the full fiscal year will be higher than the previous year, we don't expect the same kind of expansion in the second half of the year that we experienced in the first half," Greg Cappelli, Apollo's executive vice president of global strategy, said on Tuesday.
Shares of the company fell to a low of $65.82 before paring some losses to trade down $10.90 at $67.43 Wednesday morning on Nasdaq. (Reporting by Amulya Nagaraj in Bangalore; Editing by Anne Pallivathuckal)