Courtesy of Benzinga.
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