KeyBanc: 2U Poised To Disrupt Higher Education Market

While shares of 2U Inc TWOU reflect recent obstacles and potential near-term challenges, the company is a differentiated technology provider in a very large market that has been bolstered by the recent acquisition of Trilogy, according to KeyBanc Capital Markets.

The Analyst

Arvind Ramnani initiated coverage of 2U with an Overweight rating and $56 price target.

The Thesis

2U is a leading digital education platform that caters to both traditional college-level education and alternative credentials, Ramnani said in a Tuesday initiation note. (See his track record here.) 

The global higher education market, which represents a $1.9-trillion opportunity, is poised for disruption, since technology is capable of democratizing and optimizing education, the analyst said. 

The increasingly knowledge-based economy and rising cost of higher education will continue to boost demand for alternative credentials like short courses and technical boot camps, he said. 

While this market in still nascent, 2U is a differentiated technology provider, with a full suite of digital educational offerings that can be used by universities to deliver high-quality education, Ramnani said. 

The Trilogy acquisition has increased 2U’s university partnership base from 36 to 68, “creating more opportunities for increasing wallet share and relevance among universities," according to KeyBanc. 

Price Action

Shares of 2U were trading higher by 3.45% at $39.92 at the time of publication Wednesday. 

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