J.P. Morgan upgraded TAL Education (TAL) to an Overweight rating (From neutral) and raised their 12-month price target on the company to $15.00 (From $10.00) following a strong beat in New Oriental Education’s (EDU) Nov-Q.
EDU’s strong performance and guidance suggests that the post-policy tutoring industry is currently in a ‘Goldilocks’ environment with highly favorable supply/demand dynamics and a stable policy backdrop. Analysts at J.P. Morgan believe TAL’s ‘supernormal’ growth may have become the new normal, as demonstrated by TAL’s Nov-Q.
TAL’s revenue grew 61% YoY in November to $374M, significantly beating consensus (+42% y/y to $330m). GPM of 54% was also ahead of consensus estimates (53%). Non-GAAP OP was better-than-feared at -$10m with -3% OPM (vs. consensus of -$16m at -5% OPM).
Following the strong quarterly results, J.P. Morgan raised their revenue forecasts for TAL for the next three years by an average of 30%+ to Street highs, with the expectation that the company’s earnings power will surprise the market for years.
“If our model proves correct, we estimate TAL should be able to print record-high profits in two years’ time,” wrote analysts in a note.
Shares of TAL are up 5.31% in mid-day trading on Thursday.
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