Figma Shares Indicated To Open $105/$110
On Tuesday, BofA Securities made adjustments to its financial outlook for New Oriental Education (NYSE:EDU), reducing the stock's price target from $82.90 to $68.60, while still recommending a Buy rating. According to InvestingPro data, the stock is currently trading near its 52-week low, with analysis suggesting it may be undervalued at current levels. The company maintains strong fundamentals with impressive gross profit margins of 52.8%.
The decision follows New Oriental Education's latest quarterly results, which surpassed the company's revenue projections. Despite a robust year-over-year increase of 31% in core revenue (excluding East Buy), surpassing the anticipated range of 25-28%, the forecast for the upcoming February quarter's core revenue growth stands between 18-21% in USD. InvestingPro analysis reveals the company has achieved an impressive 38.7% revenue growth over the last twelve months, with a PEG ratio of 0.58 indicating attractive valuation relative to growth. This is notably lower than market expectations, which anticipated over 30% growth.
The scaled-back February quarter revenue outlook is attributed to a combination of a consumption downgrade and foreign exchange impacts. Consequently, the company has also revised its full-year core revenue forecast to a 25% increase in RMB, a decrease from the previous estimate of over 30%. Additionally, the guidance for the core non-GAAP Operating Profit Margin (OPM) for the February quarter appears subdued, with a predicted year-over-year decline of 1.5 percentage points. However, BofA Securities suggests there might be more room for margin improvement in the May quarter, given the low comparison base from the fourth quarter of fiscal year 2024.
In response to these developments, BofA Securities has also revised its non-GAAP Earnings Per Share (EPS) estimates for fiscal years 2025 and 2026, cutting them by 12% and 17% respectively. The price objective has been adjusted to reflect a valuation based on the fiscal year 2026 and a lower target multiple due to the anticipated slower growth. Despite these adjustments, BofA Securities reaffirms its positive stance on New Oriental Education's stock, citing a favorable risk-reward balance for investors.
In other recent news, New Oriental Education & Technology Group Inc. reported financial results that fell short of analyst estimates, despite a significant revenue increase. The company's adjusted earnings per American depositary share for the recent fiscal second quarter was $0.22, missing the consensus estimate of $0.32. However, the firm's revenue rose 19.4% year-over-year to $1.04 billion, slightly exceeding the expected $1.03 billion.
In the wake of these developments, Jefferies analyst firm revised its price target for New Oriental Education, reducing it to $73.00 from the previous $93.00, while maintaining a Buy rating on the company's shares. This adjustment reflects the challenges faced by the company but also leaves room for future growth opportunities.
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