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On Thursday, JPMorgan analysts downgraded shares of TAL International (NYSE:TAL) from Overweight to Neutral, significantly reducing the price target to $11 from the previous $16. According to InvestingPro data, TAL’s stock is currently trading below its Fair Value, with analyst targets ranging from $11.50 to $18.00. The company maintains impressive gross profit margins of 53.6% and has shown strong revenue growth of 55.6% over the last twelve months. This change reflects the firm’s concerns following TAL’s fourth-quarter financial results, which were released in February 2025. Despite a robust top-line growth of 44% in RMB terms, the company’s non-GAAP operating margin of -0.3% was a stark miss against the +3.5-4% expected by JPMorgan and consensus estimates, failing to demonstrate any operating leverage. InvestingPro analysis reveals that while TAL holds more cash than debt on its balance sheet and maintains a healthy current ratio of 2.57, recent performance has prompted multiple analysts to revise their earnings expectations downward.
The analysts expressed frustration over the inability to effectively analyze TAL’s underlying trends due to the company’s lack of transparency in disclosing operational key performance indicators (KPIs). Without detailed information on segment revenue or margins, and with what they described as an unusual investor relations policy that offers no communication on actual trends, the analysts find it challenging to model TAL’s future performance.
JPMorgan’s previous Overweight rating was based on the expectation that TAL would enter a profit up-cycle with strong operating leverage. However, the recent quarter’s results have undermined this confidence, leading to perplexity and frustration among the analysts. Citing the absence of clarity on TAL’s profit recovery and what transpired in the last quarter, the decision was made to downgrade the stock.
The new price target of $11 is still based on a 17x price-to-earnings ratio for the calendar year 2026 estimates, which has remained unchanged. Nevertheless, JPMorgan has significantly lowered its margin expectations and cut the earnings per share forecast by approximately 30%, despite no change in revenue projections. The analysts have opted to remain on the sidelines until there is greater visibility on TAL’s forward trends. For deeper insights into TAL’s valuation metrics and financial health indicators, including 15+ additional ProTips and comprehensive analysis, check out the full research report available on InvestingPro.
In other recent news, TAL Education Group reported first-quarter earnings and revenue that did not meet analyst expectations. The company posted adjusted earnings per American Depositary Share of $0.01, falling short of the consensus estimate of $0.09. Revenue increased by 42.1% year-over-year to $610.2 million, but this was below the projected $624.74 million. Despite the revenue growth, the earnings miss led to a significant sell-off in TAL’s stock. For the full fiscal year 2025, TAL reported net revenues of $2.25 billion, a 51% increase from the previous year. Non-GAAP net income attributable to TAL rose to $149.5 million, up from $85.3 million in fiscal 2024. The company’s board has extended its share repurchase program by 12 months, allowing for the repurchase of up to approximately $490.7 million of its common shares through April 30, 2026. TAL’s President & Chief Financial Officer, Alex Peng, noted positive user feedback in both online and offline learning programs. These developments come as TAL continues to adapt its business model following regulatory changes in China’s private education sector.
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