Credit Suisse downgrades K12 despite strong results on worries over state education budgets

Analyst downgrades K12 on state budget concerns

NEW YORK — A Credit Suisse analyst downgraded education services provider K12 Inc. Monday despite its “strong” second-quarter results, citing worries about state government budget cuts for education.

K12 provides online learning programs for students in kindergarten through 12th grade. Its technology is used by homeschoolers, online public schools and its own online private school program.

Analyst Kelly Flynn said K12 reported solid quarterly results on Friday. However, worries over state budget cuts for education led her to downgrade K12 to “Neutral” from “Outperform.”

The future is murky, as K12 won’t likely talk much about 2011 enrollments or revenue expectations until September, which could weigh on shares, Flynn wrote in a note to investors.

Baird analyst Amy Junker disagreed, saying in a note Monday that the Obama administration supported charter schools, including the virtual schools K12 services. The administration’s 2011 budget includes $490 million in funding for charter schools, she said.

She thinks that the company could announce expansion into new states this spring and summer, helping drive shares higher.

Shares of K12 dipped 9 cents to $19.11 in afternoon trading.