On Wednesday, New Oriental Education & Technology Group (9901:HK) (NYSE:EDU) experienced a downgrade in its stock rating from Outperform to Underperform by analysts at Macquarie. Accompanying this change, the firm also reduced the price target for the company's shares to HK$34.30 from the previous HK$61.60.
The adjustment by Macquarie comes in response to the company's revised financial outlook. New Oriental Education & Technology Group has adjusted its third-quarter fiscal year 2025 revenue expectations, excluding East Buy, to a year-over-year increase of 20-23% in RMB terms and 18-21% in USD terms. The revision reflects a more conservative revenue growth target due to the impact of consumption trade-down on its overseas test preparation and tourism segments.
Furthermore, the company's management has revised its fiscal year 2025 education revenue growth target down to 25% from an initial target of 30%. This move indicates a tempered expectation for the company's performance in the educational sector.
Additionally, the fiscal year 2025 overseas revenue target was also revised downward to 15%, a decrease from the previous range of 15-20%. This suggests that growth in overseas revenue for the second half of fiscal year 2025 could decelerate to a single-digit pace.
The revised targets and expectations presented by New Oriental Education & Technology Group's management have led to the reassessment by Macquarie analysts. The new targets indicate a more cautious outlook for the company's financial performance in the coming periods.
In other recent news, New Oriental Education & Technology Group has been the subject of multiple analyst rating adjustments and earnings reports. JPMorgan downgraded the company's stock from 'Overweight' to 'Neutral,' while Morgan Stanley (NYSE:MS) changed the rating to 'Equalweight.'
Both firms have voiced concerns over the company's guidance misses and estimate reductions. Despite these downgrades, New Oriental Education continues to demonstrate impressive financial health.
The company's recent earnings reports have shown a mixed picture. New Oriental Education reported adjusted earnings per American depositary share of $0.22 for the fiscal second quarter, falling short of the consensus estimate of $0.32. However, the company's revenue rose 19.4% year-over-year to $1.04 billion, slightly surpassing the expected $1.03 billion. This revenue growth is attributed to a robust year-over-year increase of 31% in core revenue.
Analyst firms BofA Securities and Jefferies have adjusted their financial outlook for New Oriental Education. BofA Securities reduced the stock's price target from $82.90 to $68.60, while Jefferies revised its price target to $73.00 from the previous $93.00. Despite these adjustments, both firms maintain a Buy rating, indicating their belief in the company's potential value.
These are recent developments and it's important for investors to keep an eye on future announcements from the company and its analysts.
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