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2U Surges on edX Acquisition, Analysts' Support

2U rises as analysts praise its $800 million acquisition of edX's assets.
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2U  (TWOU) - Get 2U, Inc. Report climbed Tuesday after the educational software company said it was acquiring nearly all the assets of online learning platform edX for $800 million in cash, garnering praise from analysts.

Shares of the Lanham, MD company ended up 4.2% at $42.08.

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2U said in a statement that the combined entity will reach over 50 million learners globally, serve more than 230 partners, and offer over 3,500 digital programs. edX offers over 3,000 online programs.

Online learning surged during the COVID-19 pandemic.

2U, which said it expects to approach $1 billion in yearly revenue by the end of 2021, has over 500 online offerings, including short courses, boot camps, professional certificates, and undergraduate and graduate degrees.

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Berenberg analyst Brett Knoblauch said purchase of edX assets is a “transformative acquisition," according to Bloomberg.

“This transaction significantly increases the funnel of potential students that 2U can enroll into its short course, boot camp, and degree programs,” said Knoblauch, who has a buy rating on the stock with $79 price target.

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KeyBanc Capital Markets analyst Jason Celino, who has a sector weight rating on 2U, said he viewed the acquisition as a positive for the company, though the transaction close and integration may take some time. 

He also sees the deal a slight negative for Coursera  (COUR) - Get Coursera Inc Report, which went public in March.

He added that 2U could leverage edX’s enterprise business to potentially further its agenda in enterprise.

Last year, Bloomberg reported that 2U hired advisers for a strategic review following pressure from an activist investor who wants the company to explore a sale.