Shares of 2U (TWOU -4.45%) plummeted 45% in morning trading Thursday after the education technology specialist reported solid fourth-quarter earnings, but offered up very weak guidance for the coming year.
2U lost more than $8 per share at 11:17 am ET, after CFO Paul Lalljie said guidance for the provider of online degree programs to colleges and universities offered "a disciplined growth strategy and continued progress toward profitability."
Losses of $0.20 per share beat Wall Street's expectations of a $0.25 per share losses, but it was much wider than the $0.06 per share losses incurred last year.
2U got a big boost from the pandemic over the past two years as COVID-19 drove an explosion in remote education opportunities. Now that in-person learning is a reality again in most places, 2U will experience the drag from the coming slowdown.
Another headwind will be its $800 million acquisition of the nonprofit edX that ran remote learning courses. 2U will be turning it into a for-profit operation, but will support a new nonprofit that will be created in the wake of the sale. 2U sees the transaction as allowing it to develop into a platform that offers program development as well as its own programs.
William Blair analyst Stephen Sheldon downgraded 2U, saying edX would provide more of headwind this year than anticipated and whether it can integrate edX as smoothly as claimed remains to be seen.
2U inherited a number of universities as customers of edX, and though it says it will honor all of the contracts made with them when edX was a nonprofit, whether they'll remain with the courses after the contracts end is unknown.
The education stock suffered a range of analyst downgrades and price target cuts in the wake of its earnings report.