UPDATE: Morgan Stanley Upgrades New Oriental Education (EDU) to Overweight
- Wall Street sell-off deepens, Nasdaq confirms correction
- Alcoa (AA) Posts Q4 EPS Beat and In-Line Revenues, Goldman Sachs Expects Results to Be 'Well Received'
- US 10-Year Treasury Yield Hits 1.9% as German 10-Year Bund Trades in Positive Territory for the First Time Since 2019; UK Inflation Hits 30-Year High
- Bank of America (BAC) Stock Gains After Earnings, Analysts Bullish
- U.S. dollar weakens, but keeps positive outlook; sterling rises after UK data
Morgan Stanley analyst Sheng Zhong upgraded New Oriental Education (NYSE: EDU) from Equalweight to Overweight with a price target of $3.50 (from $8.60).
The analyst comments "The K9 business has been hit by the 'double reduction' regulation, but the company has ample cash to expand into new businesses, such as non-academic tutoring. That said, it will take time to grow the new businesses, and competition will intensify. We have removed all K9 revenue from our model from September and part of the revenue from the summer, as K9 will be not-for-profit and taken out of the listco. K9 previously contributed ~50% of EDU's total revenue. We assume high school tutoring will remain in the listco, as well as non-K12 overseas and adult tutoring, but revenue growth will slow as competition intensifies. We forecast the company will be loss-making in F22 and F23 given additional expenses to cover employee redundancies and center closures. We cut our PT to US$3.5 after excluding the value of the K9 business, applying 1x F23e EV/sales to high school tutoring and 2x F23e EV/sales to the remaining overseas business and other businesses, as well as the new small-scale new businesses. We see share price upside potential from here and move to OW."
Shares of New Oriental Education closed at $2.00 yesterday.
You May Also Be Interested In
- UPDATE: Goldman Sachs Upgrades Silvergate Capital Corp. (SI) to Buy
- Wacker Chemie AG (WCH:GR) (WKCMF) PT Raised to EUR190 at UBS
- Rentokil Initial Plc. (RTO:LN) (RTOKY) PT Raised to GBP460 at UBS
Create E-mail Alert Related CategoriesAnalyst Comments, Analyst PT Change, Hot Comments, Hot Upgrades, Upgrades
Related EntitiesMorgan Stanley
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!