Goldman Sachs lifts New Oriental target 10% as education margins expand

Goldman Sachs raised New Oriental Education's price target 10% to HKD55 after Q4 earnings beat estimates by $64M.

"The fourth-quarter results and fiscal 2027 guidance show the core education business will become the key driver of margin expansion," Goldman Sachs said in a research report, maintaining its Buy rating.

The US-listed ADR target rose to $70 from $65, implying about 19% upside from the last close. New Oriental reported Q4 revenue of $1.53B, up 23% year over year and $64M above consensus. Non-GAAP EPS of $0.55 beat estimates by $0.09. Operating income swung to $85.8M from a loss of $8.7M a year earlier.

The stock jumped 18% to HKD47.18 on the Hong Kong exchange, with HKD319M in turnover. Management guided fiscal 2027 revenue of $6.45B to $6.68B, representing 14% to 18% growth, and approved a $500M shareholder return plan including a $300M dividend and $200M buyback.

The upgrade follows a quarter where New Oriental's non-academic tutoring expanded to 60 cities with more than 1 million student enrollments, while its overseas test preparation revenue rose 6% and adult-university programs grew 29%. The company also deployed an AI-powered personalized learning platform that generated sales within 25 days of launch.

Goldman Sachs separately raised East Buy's price target to HKD13.6 from HKD12.4, though it maintained a Sell rating on the e-commerce unit, citing higher selling and marketing expenses.

The price target increase signals that Goldman expects New Oriental's core education margins to expand as revenue growth outpaces capacity additions. The company plans to add 10% to 15% new capacity in fiscal 2027, following a 13% increase last year. Investors will watch the fiscal first-quarter results for evidence of margin acceleration from the restructuring and AI integration.

This article is for informational purposes only and does not constitute investment advice.