Wednesday, Credit Suisse downgraded New Oriental Education & Technology Group (EDU) shares to Neutral from Outperform and lowered its price target to US$76.80 from US$79.30.
The brokerage attributed the downgrade based on valuation and its near-term margin hiatus. Second quarter of 2010 was soft and management revised down full-year margin guidance citing the accelerated roll-out of U-Can 'elite'. However, recent enrolments have shown a strong pick-up and ASP trends remain positive. EDU's share price reacted by rising 10% on heavy volume, ignoring the near-term negative earnings message.
The brokerage now projects 28% second half constant currency revenue growth and 26% NP growth. The brokerage needs to wait for summer to prove if EDU's current investments bring a strong, above-40% earnings catch-up in fiscal 2011. Based on a 31x P/E (1x PEG), the brokerage introduced his calendar 2010 price target of US$76.8 from US$79.3, reflecting its estimate reduction of 12% for fiscal 2010 and 5%-6% for fiscal 2011 and fiscal 2012.
On FY5/11 valuation, the brokerage thinks EDU warrants a US$90 fair value, 10%-15% above the current share price. But for now, the brokerage feels EDU's share price deserves to range-trade at US$75-US$80, currently at 39x FY5/10 P/E already.
Currently, EDU is down US$4.34 or 5.47% and trading at US$75.01.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.