Is 2U Stock a Buy?
2020 has been an especially difficult year for higher education with the unprecedented challenges brought on by COVID-19. Just about every college has adopted virtual learning in some form and is trying to make the best of a tough situation. But 2U (NASDAQ:TWOU) has been partnering with universities since 2008, creating engaging online experiences for hundreds of thousands of students. Given that online education is only growing, should investors get in on the stock? Let's find out.
2U is in the midst of a massive transformation of its business. Four years ago, it was totally reliant on its graduate programs for revenue growth. This required the company to invest up to $10 million to develop each program with a partner university. As a quality program takes time to develop, it could be a year or more before 2U would see revenue from students. Once the completed online program is launched, it is branded under the university name, and tuition is set by the university as well.
A few years ago, the company realized this operating model with heavy upfront investments wasn't sustainable long term. It has significantly reduced the number of high-end programs it was launching and reduced the investment for the ones it did create.
Source Fool.com
