Education technology company 2U, Inc. (TWOU) in Landover, Md., operates through two segments–Degree Program and Alternative Credential. Currently, the company has 230-plus institutional partners and more than 44 million registered learners. Last year, the company acquired substantially all the assets of edX, a world-leading online learning platform and education marketplace, to create one of the world’s most comprehensive free-to-degree online learning platforms. Piper Sandler analyst Arvind Ramnani believes TWOU’s EdX acquisition could help it lower its customer-acquisition costs and should benefit TWOU. However, he sees regulatory risks for the company.
Ramnani downgraded the stock to underweight from neutral last month, citing “multiple headwinds facing the industry and business model.” He noted the regulatory risk associated with the company’s revenue-share agreements, the possibility of digital-learning fatigue, and the possibility of TWOU’s university partners insourcing the management of online programs.
