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Online Education Platform 2U Is One of Baird’s Top Ideas For 2019

Courtesy of Benzinga.

Online Education Platform 2U Is One of Baird's Top Ideas For 2019

Following a down year in 2018, investors could seek out bargains that offer the highest growth potential. Baird sees education technology company 2U Inc (NASDAQ: TWOU) as one such opportunity.

The Analyst

Analyst Jeffrey Meuler maintained an Outperform rating on 2U with an $80 price target, suggesting about 50-percent upside potential.

The Thesis

2U’s share price undervalues its portfolio and contract structure as well as its market position and capabilities, Meuler said in a Monday note.

The company exited 2018 with 48 operating programs, with an incremental 16 programs due for launch in 2019, the analyst said. 

The implied target of $5.5 million-$6 million per program per year adjusted EBITDA at a “steady state” is achievable, Meuler said. This suggests the company’s 24 programs that are more than two years old are likely to generate over $135 million in adjusted EBITDA in coming years, he said. 

“We also believe 2U is well-positioned to sell additional graduate programs, short courses and potentially new services as a preferred provider for universities, and by leveraging its existing attractive client base.” 

2U is likely to see sustained strong 30-percent-plus organic growth with attractive unit economics, the analyst said. Current challenges are client-specific and are not directly caused by 2U, he said. 

Baird sees the following as being sources of competitive advantage and differentiation for the company: 

  • Technology capabilities.
  • The MPV marketing efficiency benefits of its portfolio.
  • Clinical placement capabilities and relationships.
  • Services and support.

The Price Action

2U shares were down 0.34 percent at $53.12 at the time of publication Tuesday.

Related Links:

For-Profit Education Stocks Could Be Back In Play As Trump May Scrap Obama-Era Rules

Fed Chair Powell: ‘We Will Be Patient’

Latest Ratings for TWOU

Date Firm Action From To
Jan 2019 KeyBanc Maintains Overweight Overweight
Nov 2018 Credit Suisse Maintains Outperform Outperform
Nov 2018 BMO Capital Maintains Outperform Outperform

View More Analyst Ratings for TWOU


View the Latest Analyst Ratings

Posted-In: Baird Jeffrey MeulerAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga


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