What happened
Shares of 2U (TWOU +0.00%), plummeted this week after the company released its fourth-quarter results Wednesday afternoon. Investors did not like that the company's management expects widening losses for fiscal 2022, nor the fact that a handful of analysts downgraded the stock this week.
2U's share price has fallen by 43.1% since last Friday, according to data from S&P Global Market Intelligence.
So what
You wouldn't know it from the tech company's massive share price drop, but 2U actually beat the analysts' consensus estimates for both revenue and earnings. It reported Q4 sales of $243.6 million, up 13% from the year-ago quarter and higher than Wall Street's expectation of $243 million.
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The company's loss of $0.20 per share was also better than analysts' consensus estimate for a loss of $0.25 per share.
But even with solid results for the quarter and the year, investors focused their attention on the company's not-so-great earnings guidance for 2022. 2U's management expects a net loss in the $215 million to $235 million range, which would be a worse result than 2021's $194.8 million loss.
The company's guidance for 2022 revenue in the range of $1.05 billion to $1.09 billion was also below analysts' consensus estimate of $1.11 billion.
Following the release of 2U's fourth-quarter earnings report, at least five analysts downgraded the stock, lowered its price target, or both.
Here's a quick recap of those moves:
- Piper Sandler analyst Arvind Ramnani lowered his price target on 2U to $15 from $23, and kept a neutral rating on the stock.
- William Blair analyst Stephen Sheldon downgraded 2U to market perform from outperform.
- Brett Knoblauch, an analyst at Berenberg, downgraded the stock from buy to hold.
- Barrington analyst Alexander Paris lowered his price target to $25 from $30, but kept an outperform rating on the stock.
- A Needham analyst lowered their price target on 2U to $28 from $50.
Now what
With 2U expecting widening losses in 2022, investors may want to be cautious about buying its stock right now. The education technology company may have benefited as the pandemic surged and many students were taking online courses, but as most colleges and universities have resumed in-person classes, it's unclear how that shift will affect 2U's business over the long term.
