Online education platform, 2U (NASDAQ:TWOU) will be reporting results tomorrow afternoon. Here's what to look for.
Last quarter 2U reported revenues of $222.1 million, down 8% year on year, missing analyst expectations by 5.2%. It was a weak quarter for the company, with a miss of analysts' revenue estimates and a decline in its gross margin.
Is 2U buy or sell heading into the earnings? Read our full analysis here.
This quarter analysts are expecting 2U's revenue to decline 3.5% year on year to $224 million, a further deceleration on the 0.1% year-over-year decrease in revenue the company had recorded in the same quarter last year. Adjusted loss is expected to come in at -$0.13 per share.
Majority of analysts covering the company have reconfirmed their estimates over the last thirty days, suggesting they are expecting the business to stay the course heading into the earnings. The company missed Wall St's revenue estimates three times over the last two years.
Looking at 2U's peers in the vertical software segment, some of them have already reported Q3 earnings results, giving us a hint what we can expect. Olo delivered top-line growth of 22.3% year on year, beating analyst estimates by 2.6% and Agilysys reported revenues up 22.8% year on year, exceeding estimates by 3.1%. Olo traded flat on the results, Agilysys was up 21.7%.
Technology stocks have been hit hard on fears of higher interest rates and while some of the vertical software stocks have fared somewhat better, they have not been spared, with share price declining 3% over the last month. 2U is up 4.2% during the same time, and is heading into the earnings with analyst price target of $7.1, compared to share price of $2.5.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
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The author has no position in any of the stocks mentioned.