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Why New Oriental Education, TAL Eduction and Gaotu Techedu emerged today

What happened

Actions of New Eastern Technology and Education Group (EDU 24.39%), TAL Education Group (SUCH 9.63%)Y Gaotu Techedu (I HAVE YOU 15.15%) — all for-profit Chinese education stocks — were rising today, probably for two reasons.

First, an analyst’s positive note for New Oriental sent the stock higher yesterday and likely helped push it higher today, while also helping its rivals’ shares rise as well.

Second, recent reports have highlighted that for-profit education companies, including New Oriental, have begun incorporating e-commerce sales into their technology platforms in an effort to stay afloat after the Chinese government cracked down. against the for-profit education sector.

New Oriental was up 23.2%, TAL Education had gained 13% and Gaotu Techedu was up 14.5% as of 12:30 p.m. m. ET

And that

Yesterday, J. P. Morgan analyst DS Kim upgraded New Oriental Education to overweight from neutral and raised the stock’s price target to $24 from $14. Kim said the stock “looks really cheap” and investors are “literally paid to wait” until the company completes its restructuring.

Person using a smartphone outside.

Image source: Getty Images.

That positive sentiment sent New Orientals’ share price higher yesterday, and investors are likely to be putting pressure on the stock again as they process Kim’s comments.

Positive feedback on New Oriental’s business is also having an indirect effect on TAL Education and Gaotu Techedu.

All of these companies have suffered huge stock price losses after the government implemented restrictions on online education and tutoring in the country last year. So investors in all these companies are latching on to Kim’s comments and applying them to TAL Education and Gaotu Techedu as well.

Also, in recent days, New Oriental has received attention for incorporating e-commerce into its learning platform. Some educators on the platform have started selling products on the platform, both in English and Chinese, in an effort to earn money and teach English at the same time.

Over the weekend, New Oriental said its daily sales volume had grown 10-fold in the past few days. Some of the live videos have recently gone viral, leading some investors to believe that these education companies could transition further into e-commerce.

Now what

While it is good to see New Oriental, TAL Education and Gaotu Techedu share prices rising today, investors should remember that the future of these companies is still uncertain as they attempt to transition to new business models.

Even if they are successful in implementing some e-commerce opportunities, it does not necessarily mean that they will be successful with their online sales.

The huge gains in each company’s share price today are a good reminder that these stocks are very volatile right now. And with investors still trying to figure out whether New Oriental, TAL Education and Gaotu Techedu can adapt to China’s changing education sector, these companies are likely to continue to experience significant share price swings in the near term.

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