UPDATE: Goldman Sachs Downgrades TAL International (TAL) to Neutral
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Goldman Sachs analyst Christine Cho downgraded TAL International (NYSE: TAL) from Buy to Neutral with a price target of $79.00.
The analyst comments "With 11 new tier 3-4 cities entered in 3QFY21, TAL has built an offline learning center presence in 102 cities as of Nov-20, almost double the number of cities vs. two years ago. While smaller learning centers may ramp up faster in theory, TAL’s Peiyou Offline revenue growth rate has been falling behind EDU over the past two quarters, with -6%/0% yoy growth in Aug-20 and Nov-20, respectively, compared to 9%/17% yoy growth for EDU’s K-12 business (in Rmb terms). We attribute this to TAL’s strategic focus on promoting Peiyou Online and positioning learning centers as offline bases to improve the branding for TAL’s various business segments including Peiyou Online and Xueersi.com. While we believe this strategy will yield positive returns for TAL over the mid-to-long term especially in cities with limited presence of TAL, its offline revenue growth and margin improvement trend may be suppressed compared to EDU."
Shares of TAL International closed at $74.01 yesterday.
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