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Investing.com -- Shares of TAL Education fell 18% in early trading after the Chinese education firm reported weaker-than-expected quarterly earnings and margins, prompting JP Morgan to downgrade the stock to Neutral.
The company posted fourth-quarter earnings of $0.01 per share, missing analyst estimates by $0.08. Revenue rose 42% year-over-year to $610.2 million, but came in below the $624.7 million consensus.
Despite the strong top-line growth, TAL reported a non-GAAP operating margin of -0.3%, significantly below analyst forecasts of 3.5% to 4%.
JP Morgan described the results as “disappointing, no two ways about it,” citing surging sales and marketing costs and a lack of visibility into key performance metrics.
“Our OW rating on TAL was predicated on our expectation of TAL entering a profit up-cycle with strong operating leverage,” JPMorgan wrote.
However, this quarter has shaken our confidence, it said, cutting its price target to $11 from $16.
UBS flagged a “notable margin miss” driven by higher-than-expected marketing expenses, likely tied to learning hardware.
The bank noted a 57% year-over-year increase in deferred revenue as a potential bright spot, but warned the results could weigh on the FY26 margin outlook.
TAL extended its $490.7 million share repurchase program to April 2026, though only $13.1 million has been utilized so far.