Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of 2U Are Up Today

By Lou Whiteman - Mar 26, 2020 at 3:55PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Analysts say perhaps it is time to take a fresh look at the online education company.

What happened

Shares of 2U (TWOU -0.77%) were up 14% on Thursday afternoon after the online learning platform received an analyst upgrade. It was the company's second upgrade in two days, as analysts conclude the stock is oversold following a difficult year.

So what

2U held an investor day earlier this week in which it affirmed its first-quarter guidance and said its business has held up well during the COVID-19 coronavirus pandemic. In theory the education-focused software-as-a-service provider is a potential stock that would benefit from the ongoing outbreak, as 2U is focused on helping university partners offer online instruction.

student looking at laptop holding book doing research

Image source: Getty Images.

But 2U is still trying to claw its way back from a disastrous May 2019 earnings call, when it lowered its full-year revenue projections due to reduced enrollments, admitting that competition is heating up in its business and announcing it was scaling back expansion in favor of optimizing the programs it was on.

2U has lost more than 65% of its value since that call, and the company still hasn't regained investor trust. So even if there is an opportunity created out of the pandemic, markets are likely in "wait-and-see" mode instead of piling on in anticipation of growth.

Now what

Barrington analyst Alexander Paris upgraded 2U to outperform in a note Thursday, saying he sees "relatively little impact" from the pandemic and believes that longer term, it could be a positive for the company. The move comes a day after Needham analyst Ryan MacDonald upgraded 2U to a buy from hold, saying he was impressed with management's initiatives to assist universities in moving classes online and believes the demand trends for online education are still moving in 2U's favor.

2U shares are still down a long way from where they traded a year ago. But if Thursday's gains are any indication, perhaps investors are beginning to take a fresh look at the company's long-term prospects.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

2U, Inc. Stock Quote
2U, Inc.
$11.55 (-0.77%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.