Shares of online education company 2U took a significant hit, dropping 35% to $1.54, following the release of their third-quarter earnings report. The company reported a wider-than-expected loss, which led to a decline in investor confidence.
Financial Performance
The third-quarter loss amounted to $47.4 million, or 58 cents per share. This compares to a loss of $121.7 million, or $1.57 per share, during the same period last year. Analysts polled by FactSet had anticipated a loss of $31.6 million, or 39 cents per share. Adjusted losses were recorded at 15 cents per share, slightly higher than the expected loss of 13 cents per share.
Although revenue for the quarter came in at $229.7 million, slightly lower than last year’s $232.2 million, it was still higher than the projected $224 million.
Future Projections
Looking ahead to 2023, 2U expects revenue to range from $965 million to $990 million. Analysts are slightly more optimistic, forecasting revenue of $977.8 million. However, the company is also anticipating a loss between $250 million and $240 million, while analysts are predicting a loss of $237 million.
Analyst Actions
As a result of the disappointing Q3 results, brokerage firms Needham and Morgan Stanley have adjusted their price targets for 2U shares. Needham lowered their target from $9 to $3 per share while maintaining a buy rating. Morgan Stanley also reduced their price target from $3 to $2 per share while maintaining an Equal-weight rating.
This unexpected drop in 2U shares highlights the challenges faced by the company in the online education sector. Investors will be closely watching as the company strives to regain stability and improve financial performance in the coming months.