Citi downgraded New Oriental Education (EDU) to Neutral from Buy with a price target of $50, down from $83, as part of a pair trade that also goes long TAL Education (TAL). New Oriental Education faces significant growth resets amid broad-based headwinds as its K-9 growth is normalizing to 40% from 43% and its overseas business is moderating to 15% from 20% target, the analyst tells investors in a research note. In contrast, TAL’s Q3 results are seen reflecting the company’s operational leverage driving the margin expansion of its core education business, Citi adds, also citing TAL’s strong traction of its learning devices.
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