Yahoo Finance Analysts Are Updating Their 2U, Inc. (NASDAQ:TWOU) Estimates After Its Third-Quarter Results
The quarterly results for 2U, Inc. (NASDAQ:TWOU) were released last week, making it a good time to revisit its performance. The business exceeded revenue expectations with sales of US$201m coming in 6.6% ahead of forecasts. Statutory losses were US$0.77 a share, in line with what the analysts predicted. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Check out our latest analysis for 2U
Taking into account the latest results, the most recent consensus for 2U from 14 analysts is for revenues of US$901.7m in 2021 which, if met, would be a sizeable 25% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 29% to US$2.41. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$872.0m and losses of US$2.62 per share in 2021. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrades to both revenue and loss per share forecasts for next year.
Despite these upgrades,the analysts have not made any major changes to their price target of US$49.75, implying that their latest estimates don't have a long term impact on what they think the stock is worth. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values 2U at US$65.00 per share, while the most bearish prices it at US$34.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that 2U's revenue growth is expected to slow, with forecast 25% increase next year well below the historical 32%p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 13% next year. So it's pretty clear that, while 2U's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple 2U analysts - going out to 2023, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 3 warning signs for 2U that you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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