East China Securities Analyzes New Oriental Guidance, Citibank Upgrades Rating

Summary

Dongwu Securities noted that New Oriental’s Q1 guidance is relatively conservative due to challenges in the macro environment of overseas business, high base, and revenue recognition pace. They expect overall revenue growth to pick up after Q2. Additionally, the company announced a new three-year shareholder return plan, promising to return no less than 50% of the previous fiscal year’s net profit to shareholders. Citi analyst Alice Cai upgraded New Oriental to a buy rating and raised the target price from $50 to $75.Zhitong+ 2Zhitong

Impact Analysis

So basically, New Oriental’s conservative Q1 guidance is a strategic move to manage expectations amidst macro challenges and high base effects. The real story here is the new three-year shareholder return plan, which signals strong confidence in future cash flows and profitability. Citi’s upgrade to a buy rating and the significant target price increase to $75 suggests that the market may be underestimating New Oriental’s recovery potential post-Q1. The cautious guidance might be a setup for positive surprises in the following quarters, especially with the expected revenue growth rebound after Q2. This could be a good entry point before the market fully prices in the recovery and shareholder returns. Watch for execution on the shareholder return plan and any updates on macro conditions affecting their overseas business.Zhitong+ 2Zhitong