Oppenheimer Expects 2U To Post Share Gains, Strong Revenue In 2019

Education technology company 2U Inc (NASDAQ: TWOU) reported solid fourth-quarter results Monday and announced healthy first-quarter guidance.

The company is well-positioned for strong revenue growth and share gains in 2019, according to Oppeneheimer.  The sell-side firm sees bright long-term prospects for 2U on the basis of a large total addressable market created by digital disruption of higher education.

The Analyst

Oppenheimer’s Brian Schwartz maintained an Outperform rating on 2U and raised the price target from $70 to $83.

The Thesis

2U reported fourth-quarter revenue of $115.1 million, representing 33-percent year-on-year growth and handsomely beating the consensus estimate. Adjusted EBITDA of $20.1 million and PF EPS of 23 cents were also ahead of expectations, Schwartz said in a Tuesday note. 

The company guided to 2019 revenue of $546.6-$550.8 million, the midpoint of which is about $1 million higher than the consensus estimate. Its adjusted EBITDA and PF EPS of $11.8-$14.2 million and a loss of 37 to 33 cents per share, respectively, were also better than expectations.

For pre-2015 programs, 2U reached an EBITDA margin of 42 percent in 2018.

Although the company felt “some lingering pressures” on domestic graduate program enrollment, the overall results and outlook were strong, Schwartz said. 

Price Action

2U shares were up 8.22 percent at $77.05 at the time of publication Tuesday. 

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