What happened

Shares of 2U (TWOU -1.26%)were moving lower today after some investors seemed unimpressed by its Investor Day conference, despite mostly positive Wall Street commentary, and one analyst lowered their price target on the stock.

As of 1:56 p.m. ET, the stock was down 5.9%.

So what

2U, a software-as-a-service company that helps universities provide online education through its EdX platform, held an Investor Day conference yesterday, giving the company a chance to explain its value proposition and growth strategy to investors.

The company said it was well positioned as a leader in higher education software, touting a large and growing addressable market that's expected to expand from $6.5 billion in 2020 to $10 billion in 2030.

It also reasserted its value proposition as a tool that helps educational institutions save money and offer lower tuition to online students.

2U has delivered 19% compound annual revenue growth over the last four years, reaching $963 million in 2022, and its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin has steadily improved as well, coming in at 13% last year. The company also reiterated its goal of delivering positive free cash flow this year and its guidance for 26% adjusted EBITDA growth.

However, there didn't seem to be anything new or eye-opening for investors in the presentation, and investor day conferences often come with those expectations, which seems to explain today's sell-off.

Separately, Credit Suisse analyst Rich Hilliker lowered his price target from $11 to $9 but maintained his neutral rating. The new price target still implies a 23% upside to the stock based on its closing price yesterday.

Now what

Education stocks have fallen out of fashion in recent years following an earlier crackdown on for-profit educators and China's own ban on for-profit tutoring services.

2U stock is down more than 90% from its peak in 2018, showing that the growth opportunity in higher education software may not be as big as investors once imagined. 

The company's recent results have also given investors pause as revenue grew just 2% in 2022 and fell 3% in the fourth quarter. Despite its improvements in profitability, the stock is likely to struggle until the top line reaccelerates.