US stock futures inch higher after Wall St rides Alphabet to record highs
On Thursday, Citi analyst Brian Dapeng Gong increased the price target for Youdao (NYSE:DAO) stock to $9.60, up from the previous $8.10, while maintaining a Neutral rating on the shares. The company, currently trading at $9.43 with a market capitalization of $1.13 billion, has demonstrated remarkable momentum with a 122.56% return over the past year. The adjustment follows Youdao’s first-quarter 2025 financial results, which showcased revenues matching expectations and adjusted earnings surpassing the consensus forecast from VisibleAlpha. According to InvestingPro analysis, the stock appears fairly valued at current levels.
The company’s earnings outperformance is largely credited to the effective optimization of research and development (R&D) and administrative expenses, as well as the scaling back of its lower-margin businesses, including adult education and Science, Technology, Engineering, Arts, and Mathematics (STEAM) courses. Gong anticipates that the year-over-year performance of learning courses will improve, citing easier comparisons for adult and STEAM courses and solid momentum in high school course offerings.
Management at Youdao is optimistic about advertising growth accelerating in the second half of 2025, driven by the expansion into overseas markets and increased support from its parent company. In light of these developments, Citi has revised its net profit margin estimates for 2025 and 2026 to 4% and 5%, respectively, up from the earlier projections of 2% and 4%.
Despite Youdao actively exploring artificial intelligence (AI) opportunities within educational and advertising scenarios—potentials that could serve as new growth drivers in the medium term—Citi has decided to maintain its Neutral stance. This is attributed to the ongoing transition within the company’s learning course business.
In other recent news, Youdao Inc . reported its fourth-quarter 2024 earnings, revealing a significant earnings per share (EPS) of $0.70, which surpassed analyst expectations of $0.5359 by 30.6%. However, the company faced challenges in revenue, reporting $1.34 billion against the anticipated $1.54 billion, a shortfall of 12.99%. Despite this revenue miss, Youdao celebrated its first-ever full-year operating profit, marking a significant milestone in its financial performance. The company’s total revenue for the year increased by 4.4% to RMB 5.6 billion, while net income reached RMB 82.2 million, a turnaround from a loss in 2023. Analysts have shown interest in Youdao’s strategic focus on AI integration, which was highlighted by the company’s CEO, Dr. Feng Zhou, as a key driver for future growth. Additionally, Youdao has been actively expanding its international advertising partnerships, notably establishing a partnership with Google (NASDAQ:GOOGL), which is expected to bolster its overseas advertising efforts. The company also reported improvements in operating cash flow, which improved by 84.5% year-over-year. These developments underscore Youdao’s ongoing efforts to strengthen its market position and financial health.
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