Youdao (DAO) AI Stock Analysis

Compare

230 Followers

DAO Dividends

Top Page

Youdao

(NYSE:DAO)

54Neutral

Youdao's stock score reflects a blend of financial challenges and opportunities. While financial performance shows operational improvements, significant leverage and cash flow issues present risks. The technical analysis suggests potential for a reversal from recent declines, but valuation concerns due to a high P/E ratio could limit upside. The strategic focus on AI and profitability highlighted in the earnings call provides a promising outlook, though revenue declines remain a concern.

Youdao (DAO) vs. S&P 500 (SPY)

Market Cap

$1.02B

Dividend YieldN/A

Average Volume (3M)128.69K

Price to Earnings (P/E)89.3

Beta (1Y)1.06

Revenue Growth3.01%

EPS GrowthN/A

CountryUS

Employees3,750

SectorTechnology

Sector Strength65

IndustryEducation & Training Services

Share Statistics

EPS (TTM)0.10

Shares Outstanding31,280,890

10 Day Avg. Volume99,719

30 Day Avg. Volume128,690

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$8.10

Price Target Upside-6.57% Downside

Rating ConsensusHold

Number of Analyst Covering0

Youdao Business Overview & Revenue Model

Company DescriptionYoudao, a subsidiary of NetEase, Inc., is a leading intelligent learning company in China that provides a wide range of online education services. It operates in the education technology sector, focusing on developing and offering educational content, applications, and solutions for students, professionals, and lifelong learners. Its core products include Youdao Premium Courses, Youdao Dictionary, and a suite of smart devices aimed at enhancing learning experiences.

How the Company Makes MoneyYoudao makes money through a diversified revenue model primarily centered around its online education services. Key revenue streams include the sale of Youdao Premium Courses, which are paid educational programs offering various subjects and skill development. The company also generates income through advertising services on its platforms and the sale of smart learning devices, such as electronic dictionaries and translation pens. Additionally, Youdao benefits from strategic partnerships with educational institutions and content creators to expand its offerings and user base.

Youdao Financial Statement Overview

Summary

Youdao shows a mixed financial performance with strengths in revenue growth and gross profitability, yet faces significant challenges in net profitability, leverage, and cash flow generation. While the operational improvements are promising, the negative equity and cash flow issues present potential risks that need addressing for long-term financial health.

Income Statement

Positive

Youdao has shown a consistent revenue growth over the years, with the most recent annual increase of 4.39% from 2023 to 2024. The gross profit margin for 2024 stands at 48.86%, indicating a healthy profitability at the gross level. However, despite improving from a net loss in previous years, the net profit margin is 1.46% in 2024, showing that profitability at the net level remains a challenge. The EBIT and EBITDA margins are low but show a positive trend, reflecting operational improvements.

Balance Sheet

Neutral

The company's balance sheet reflects high leverage, with a negative stockholders' equity of -$2.14 billion, resulting in an uncalculated debt-to-equity ratio. This indicates potential financial instability. The equity ratio is also negative due to the negative equity. Despite these concerns, the company has substantial cash reserves of $655.79 million, offering some liquidity cushion.

Cash Flow

Negative

The cash flow statement reveals challenges in cash generation, with operating cash flow and free cash flow both at $0 for 2024, indicating potential operational inefficiencies. Earlier years show negative free cash flow, highlighting consistent cash outflows. The lack of positive free cash flow growth and operating cash flow to net income ratio raises concerns about the company's ability to generate cash sustainably.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
5.63B	5.39B	5.01B	4.02B	3.17B
	Gross Profit
2.75B	2.77B	2.59B	1.99B	1.45B
	EBIT
148.82M	-466.33M	-774.68M	-886.47M	-1.81B
	EBITDA
178.46M	-439.92M	-680.33M	-856.37M	-749.42M
	Net Income Common Stockholders
82.21M	-549.93M	-739.78M	-926.09M	-1.75B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
655.78M	526.66M	1.02B	826.88M	1.19B
	Total Assets
1.81B	1.67B	2.28B	2.63B	2.07B
	Total Debt
1.82B	1.60B	1.44B	1.21B	957.75M
	Net Debt
1.22B	1.14B	660.37M	883.32M	348.55M
	Total Liabilities
3.90B	3.80B	3.75B	3.36B	3.48B
	Stockholders Equity
-2.14B	-2.19B	-1.54B	-807.07M	-1.41B
Cash Flow		Free Cash Flow
0.00	-456.00M	-672.88M	-1.41B	-358.42M
	Operating Cash Flow
0.00	-438.14M	-603.12M	-1.35B	-321.56M
	Investing Cash Flow
0.00	125.57M	125.82M	47.07M	760.97M
	Financing Cash Flow
0.00	-18.94M	184.65M	1.78B	26.56M

Youdao Technical Analysis

Technical Analysis Sentiment

Positive

Last Price8.67

Price Trends

50DMA

8.29

Positive

100DMA

7.94

Positive

200DMA

6.07

Positive

Market Momentum

MACD

0.22

Negative

RSI

64.40

Neutral

STOCH

95.39

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DAO, the sentiment is Positive. The current price of 8.67 is above the 20-day moving average (MA) of 7.73, above the 50-day MA of 8.29, and above the 200-day MA of 6.07, indicating a bullish trend. The MACD of 0.22 indicates Negative momentum. The RSI at 64.40 is Neutral, neither overbought nor oversold. The STOCH value of 95.39 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for DAO.

Youdao Risk Analysis

Youdao disclosed 97 risk factors in its most recent earnings report. Youdao reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Youdao Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
COUR	73 Outperform	$1.36B	―	-10.84%	―	7.26%	39.62%
VMEO	72 Outperform	$839.10M	32.42	6.70%	―	-0.05%	23.22%
DSP	66 Neutral	$900.44M	420.88	3.87%	―	29.74%	―
UDMY	61 Neutral	$954.85M	―	-30.77%	―	7.91%	22.07%
Sector *	59 Neutral	$10.75B	10.37	-6.64%	3.00%	7.30%	-12.02%
DAO	54 Neutral	$1.02B	89.29	25.15%	―	3.01%	―
GOTU	54 Neutral	$789.62M	―	-41.45%	―	51.50%	-70812.50%

* Technology Sector Average

Performance Comparison

DAO

Youdao

8.67

5.08

141.50%

GOTU

Gaotu Techedu

3.25

-3.73

-53.44%

DSP

Viant Technology

14.40

6.00

71.43%

COUR

Coursera

8.41

-1.20

-12.49%

VMEO

Vimeo

5.09

1.42

38.69%

UDMY

Udemy Inc

6.42

-3.71

-36.62%

Youdao Earnings Call Summary

Earnings Call Date:Feb 20, 2025

(Q4-2024)

% Change Since: -16.87%|

Next Earnings Date:May 27, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mix of positive developments and challenges. The company achieved record profitability and strong growth in AI-driven services and smart devices, but faced revenue declines in learning services and overall Q4 revenue. The strategic focus on AI and operational efficiency suggests a positive outlook.

Q4-2024 Updates

Positive Updates

Record Profitability Achieved

For the first time, Youdao achieved full-year operating profitability with an income from operations of RMB148.8 million, a turnaround from a loss of RMB466.3 million in 2023.

AI-Driven Subscription Services Growth

AI-driven subscription services generated sales of over RMB200 million, representing an increase of over 130% year-over-year.

Smart Devices Segment Performance

Net revenues from smart devices reached RMB240.4 million in Q4, marking an 8.1% year-over-year increase, driven by the success of the Youdao Dictionary Pen.

Online Marketing Services Growth

Net revenues from online marketing services were up 48.3% year-over-year to RMB2 billion for the full year.

Successful Launch of New AI Model

The rollout of Confucius-o1, a reasoning model, supports deployment on consumer-grade GPUs and is notable for being open-sourced, encouraging innovation in the education sector.

Negative Updates

Learning Services Revenue Decline

Net revenues from learning services reached RMB617.7 million in Q4, down by 21.2% year-over-year, contributing to a full-year decline of 12.7%.

Total Revenue Decrease in Q4

Total net revenues were RMB1.3 billion in Q4, representing a 9.5% decrease from the same period of 2023.

Reduced Gross Margin in Learning Services

Gross margin for learning services was 60% for Q4 2024, compared with 63.6% for the same period of 2023.

Company Guidance

During the Youdao 2024 Fourth Quarter and Full-Year Earnings Conference Call, the company provided detailed guidance on its financial performance and strategic direction. In Q4 2024, Youdao reported net revenues of RMB1.3 billion, marking a 9.5% year-over-year decline, primarily due to decreased revenues from learning services, which fell 21.2% to RMB617.7 million. Despite this, the company achieved a 10.3% increase in income from operations, reaching RMB84.2 million. For the full year, net revenues grew by 4.4% to RMB5.6 billion, with a significant turnaround in operational performance, achieving a profit of RMB148.8 million compared to a loss of RMB466.3 million in 2023. Operating cash outflow improved by 84.5% to RMB67.9 million. Key strategic focuses included leveraging cutting-edge AI technologies in education and online marketing, enhancing products like the Youdao Dictionary Pen, and expanding global advertising efforts. The company also highlighted its AI-driven subscription services, which saw an over 130% increase in sales, and its commitment to innovation with the launch of Confucius-o1, a reasoning model for educational use. For 2025, Youdao aims for moderate revenue growth with a continued focus on profitability, driven by advancements in AI integration across its business lines.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.