Compass Point Raises Price Target On 2U

Compass Point reiterated a Buy rating on 2U Inc TWOU Wednesday and raised its price target from $20 to $23.

Analyst Michael Tarkan made the change "after the company reported a 3rd straight earnings beat, as revenues and adjusted EBITDA came in ahead of our model and consensus."

Tarkan continued to view "TWOU as a unique growth story that is well positioned to capitalize on the secular shift towards online education, through an emphasis on student engagement, learning outcomes, and brand preservation of high quality schools.

"The company's revenue visibility is significant, and while profitability remains somewhat distant given new program investments, the embedded revenue and earnings pipeline from existing programs is meaningful."

The firm raised its 2014 adjusted EPS estimate to ($0.57), from ($0.62), reflecting the strong Q3 results. It also lowered the 2015 estimate to ($0.47), from ($0.45), but raised the 2016 estimate to ($0.15), from ($0.20), "to primarily reflect the addition of one new program for 2015 and the related acceleration in investment spend."

The report concluded that with "4-5 new programs per year...we now expect the company could be adjusted-EBITDA positive in 2016, versus 2017."

2U recently traded at $17.58, up 1.21 percent.