When this mess is over – and it will be over – the economy and the world and going to be left changed in profound ways.
If you’ve been watching the news - especially financial news - you’ve had a steady diet of gloom and doom about the projected economic effects. It’s going to be painful for many American Businesses as well as many working Americans.
You’ve also probably noticed that as people observe the recommended guidelines for social distancing – and later the outright closures of many businesses and executive orders in California and New York to stay home – virtually everyone who can is working from home.
There’s already been plenty of coverage about the so-called “work from home” companies that provide technology for video conferencing, network traffic control, file sharing and other services that allow people to perform the essential duties of their jobs from remote locations.
There’s also another big group of people who are working from home – students. Most K-12 school districts, colleges and universities have suspended in-person class sessions. Many are looking to online alternatives so that the educational process can continue during the crisis.
It’s likely that once the crisis has ended, many students and educators will choose to continue using online alternative learning options - even when it’s feasible to return to a traditional classroom setting.
2U Inc (TWOU) provides software-as-a-service (SAAS) educational programs to colleges in a wide range of study areas, including business administration, healthcare, education and the sciences. The Zacks Rank #3 (Hold) company has been operating slightly below breakeven, but in the SAAS space, each additional customer increases margins.
The product development costs are basically fixed, and ongoing support and administration costs are built into the price of the product. Each marginal subscriber adds more and more to the bottom line.
A recent price slide in the share leaves 2U more than 40% below recent highs, just two weeks ago.
Instructure (INST) currently carries a Zacks Rank #2 (BUY), offers a similar product to the 2U line and stands to benefit from the same trends in education. It’s also built on open source software and includes iOS and Android apps to allow mobile access.
Additionally, Instructure offers a program for K-12 education in addition to the college-level courses. K-12 is potentially an even better growth opportunity than the post-secondary market because while some Universities are able to develop their own online learning tools, K-12 schools generally don’t the budget or expertise for that undertaking. It’s simpler and more cost-effective for them to license an off-the-shelf suite.
Instructure shares have held up much better lately - so investors don’t get the apparent price discount of 2U – but they do get that wider variety of products to add to future revenues.
For anyone who believes that the work-at-home trend will still be intact long after the end of this crisis, it makes sense to also check out learn-at-home stocks.
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