Bank of America told clients that New Oriental Education & Technology (NYSE:EDU) should continue to grow as it views early 2022 as the trough for the company.
In short, the bank’s analyst Lucy Yu told clients that she expects not only a strong rebound in revenue, but a turn toward profitability in coming quarters.
“We estimate EDU will turn profitable in FY23 on operating leverage, ramping-up profitability of new business and Koolearn, and absence of restructuring costs,” she wrote in a note published on Friday. “[The] current share price is on par with net cash per share, and has not reflected the recovery in the remaining business and upside from the new business and online platform. In addition, the company announced a $400M ADR repurchase plan that will last till May 2023, which could offer further support to share price.”
Alongside the upgrade to “Buy” from a prior “Neutral”, while raising her price target to $36.60 from a prior $18.80.
Despite the upgrade, shares of the Chinese education stock slid 7.19% in the final hours of the week’s trading as China-linked stocks were hit by regulatory concerns.