The once very hot education stocks segment has turned into a disaster over the past couple of years, and things do not appear to be getting any better for some of the companies. A new report from Piper Jaffray presents a bull and bear case for the industry, but one thing seems obvious. It may be much harder for the bull case to play out than the bear case.

In the report, the Piper Jaffray team says that given the mixed near-term fundamentals, continued rising regulatory worries and secular competitive pressures, they believe it is more than appropriate to remain Underweight the group, despite valuations that make some of the stocks look cheap.

Here are the four stocks that Piper Jaffray feels could experience above-average regulatory and/or operating risk. Three are rated Neutral and one Underweight.

Bridgepoint Education Inc. (NYSE: BPI) has set very aggressive enrollment targets that may be difficult to fulfill. While its lower tuition model and liberal credit transfer is a plus, the road forward may be rough. The Piper Jaffray target for the stock, which is rated Neutral, stands at $13. The Thomson/First Call consensus estimate is at $17.17 Shares closed Tuesday at $13.10.

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Career Education Corp. (NASDAQ: CECO) is also rated Neutral by Piper Jaffray. The analysts think the company has very weak fundamentals, and possible significant regulatory risk. Despite cutting expenses and raising enrollment levels, its positives are far outweighed by the other potential issues facing the company. The Piper Jaffray price target is $6, and the consensus target is lower at $5.50. Shares close Tuesday at $4.64.

Education Management Corp. (NASDAQ: EDMC) could potentially have the biggest upside. Also rated Neutral, the Piper Jaffray analysts say visibility on sustainable enrollment growth is very limited. They also cite greater than average regulatory, legal and leverage headwinds facing the company. Their price target is a very surprising $5 a share. The consensus target is a much lower at $3.88. The stock closed Tuesday at $1.61.

Strayer Education Inc. (NASDAQ: STRA) is rated Underweight at Piper Jaffray, and based on their price objective it may be a short-sale candidate. While the firm applauds the aggressive cost cutting and new starts in the turnaround process, they view the heavy tuition cost-cutting as worrisome as they expect revenue declines to continue. The Piper Jaffray price target is $47, and the consensus is even lower at $45.33. Strayer closed Tuesday at $51.20.

In a market that seems to really be thinking about rolling over, any of these names may be candidates for removal from an account, especially if you are up on them. The for-profit education business has always been fraught with regulatory issues and other dicey gray areas. Owning them in any market weakness may not be a good road to take.

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