What happened
Shares of online college platform 2U (TWOU) cratered today after it received a downgrade from a Wall Street analyst. As of 2:30 p.m ET, the stock was down 16% for the session and has now fallen 56% year to date.
So what
Piper Sandler analyst Arvind Ramnani downgraded their outlook for 2U stock today, according to The Fly. As recently as November, Ramnani had a buy rating on 2U stock with a price target of $37 per share. But in January they lowered their rating to hold with a price target of $23. Now Ramnani recommends selling, which is why the stock is down today.
Investors should keep today's move in perspective. 2U stock soared earlier this month on reports that Byju's -- an online education company in India -- is looking to acquire both 2U and its peer Chegg. So while the stock is down big today as Ramnani recommends selling, it's merely back down to where it was trading prior to these acquisition rumors.
Image source: Getty Images.
Now what
Despite what the stock price says, 2U is still a growth company. Revenue in 2021 was up 22% compared to 2020. Revenue for the first quarter of 2022 was up 9% year over year. And management is projecting 13% revenue growth for the entire year.
However, 2U's operating losses are still quite high despite its growth. In Q1, the company had an operating loss of $111 million -- up 200% from the same quarter last year. With hefty losses, investors are understandably reluctant to buy shares of 2U right now. And it's one reason why it might make sense for 2U to be a part of a larger company.
