What happened
After a disastrous reception to its fourth-quarter earnings report that caused 2U's (TWOU +0.00%) stock to plunge 45% last week, the provider of online degree programs to colleges and universities rebounded 6.8% from where it finished trading a week ago, according to data from S&P Global Market Intelligence.
Insiders obviously thought that was a ridiculous response to 2U's solid results and cautious outlook, as they swooped in to scoop up hundreds of thousands of shares of the deeply depressed stock.
Image source: Getty Images.
So what
Investing legend Peter Lynch famously noted, "Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise."
2U CEO Christopher Paucek bought over 26,000 shares for a total value of $251,000, but his purchase wasn't the biggest insider buy. COO Mark Chernis spent $400,000 buying more than 43,000 shares while Director Gregory Peters picked up nearly 50,000 shares for $500,000.
However, Director Paul Mader outdid them all, almost doubling their combined purchases. He bought 110,000 shares, effectively doubling his stake in the company, for a whopping $1.04 million.
It should be noted that all of these insiders bought shares on the open market, not as a result of being granted options or some other program that would suggest a less bullish sentiment.
Now what
2U is not alone in seeing business growth normalize to more historical levels after two years of extraordinary gains due to the pandemic.
Online education became a critical component for colleges and universities that were shut down due to COVID-19, and though there is still some pressure to keep remote learning going, most educational institutions are back to full in-person classes.
The market has been anticipating this slowing growth and has pushed 2U's shares lower for the past year. It now trades 80% below where it did a year ago, which seems especially harsh for a company that is still growing quarterly revenue 22% year over year and was forecasting full-year revenue for 2022 of $1.05 billion to $1.09 billion, or a 13% increase at the midpoint.
Key Data Points
Certainly it's dramatically lower than the 35% growth 2U saw in 2020, and analysts are expecting the company to run into headwinds as it integrates its acquisition of the nonprofit remote learning course developer edXinto as a for-profit operation.
Even so, 2U is still guiding toward producing between $70 million and $90 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2022, a 20% increase from last year, which is likely why insiders bought a boatload of shares for themselves.
