Is 2U Done For After Q2?

2U Inc. (NASDAQ: TWOU) released its fiscal second-quarter financial results after the markets closed on Tuesday. Although the bottom line for this quarter was not that great, the guidance is really what’s crippling the stock. Not to mention, analysts are weighing down the stock as well.

The educational technology company posted a net loss of $0.43 per share and $135.5 million in revenue, while consensus estimates had called for a net loss of $0.35 per share and $135.46 million in revenue. The same period of last year reportedly had a net loss of $0.19 per share and $97.42 million in revenue.

Looking ahead to the fiscal third quarter, the company expects to see a net loss per share in the range of $1.10 to $1.05 and revenue between $147.6 million and $152.6 million. Consensus estimates are calling for a net loss of $0.09 per share and $137.7 million in revenue for the quarter.

Christopher Paucek, co-founder and CEO, commented:

With the close of our Trilogy acquisition, 2U’s business is evolving to better meet marketplace demand and the transforming needs of our university partners and lifelong learners. As we deliver our full portfolio of educational offerings to new and existing partners, we are also setting 2U on a defined path to profitability by tempering short-term growth projections and leveraging our scale to drive greater operational efficiencies across the business.

The consensus view from analysts was that the company’s model is breaking down, with online educational programs in the decline. Most are expecting near-term pressure and a lower growth profile going forward. Here’s what analysts actually had to say:

  • CIBC reiterated a Market Perform rating.
  • D.A. Davidson downgraded it to Neutral from Buy.
  • Needham downgraded it to a Hold rating from Buy.
  • Oppenheimer dropped its rating to Market Perform from Outperform.
  • Macquarie downgraded the shares to a Neutral rating.
  • BMO Capital Markets downgraded it to Market Perform from Outperform.
  • Robert Baird downgraded it to a Neutral rating from Outperform.

Shares of 2U retreated 66% to $12.42 on Wednesday, in a 52-week range of $12.21 to $90.31. The consensus price target is $67.62.