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Why Shares of 2U Are Up Today

What happened

Shares of 2U (NASDAQ: TWOU) were up 14% on Thursday afternoon after the online learning platform received an analyst upgrade. It was the company's second upgrade in two days, as analysts conclude the stock is oversold following a difficult year.

So what

2U held an investor day earlier this week in which it affirmed its first-quarter guidance and said its business has held up well during the COVID-19 coronavirus pandemic. In theory the education-focused software-as-a-service provider is a potential stock that would benefit from the ongoing outbreak, as 2U is focused on helping university partners offer online instruction.

student looking at laptop holding book doing research

Image source: Getty Images.

But 2U is still trying to claw its way back from a disastrous May 2019 earnings call, when it lowered its full-year revenue projections due to reduced enrollments, admitting that competition is heating up in its business and announcing it was scaling back expansion in favor of optimizing the programs it was on.

2U has lost more than 65% of its value since that call, and the company still hasn't regained investor trust. So even if there is an opportunity created out of the pandemic, markets are likely in "wait-and-see" mode instead of piling on in anticipation of growth.

Now what

Barrington analyst Alexander Paris upgraded 2U to outperform in a note Thursday, saying he sees "relatively little impact" from the pandemic and believes that longer term, it could be a positive for the company. The move comes a day after Needham analyst Ryan MacDonald upgraded 2U to a buy from hold, saying he was impressed with management's initiatives to assist universities in moving classes online and believes the demand trends for online education are still moving in 2U's favor.

2U shares are still down a long way from where they traded a year ago. But if Thursday's gains are any indication, perhaps investors are beginning to take a fresh look at the company's long-term prospects.

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Lou Whiteman owns shares of 2U. The Motley Fool owns shares of and recommends 2U. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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