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Youdao (DAO)
NYSE:DAO
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Youdao
(NYSE:DAO)
Rating:56Neutral
Price Target:
$9.00
▲(2.16%Upside)
Youdao (DAO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.05B
Dividend YieldN/A
Average Volume (3M)47.47K
Price to Earnings (P/E)51.9
Beta (1Y)0.95
Revenue Growth-2.04%
EPS GrowthN/A
CountryUS
Employees3,750
SectorTechnology
Sector Strength94
IndustryEducation & Training Services
Share Statistics
EPS (TTM)0.01
Shares Outstanding31,280,890
10 Day Avg. Volume50,241
30 Day Avg. Volume47,471
Financial Highlights & Ratios
PEG Ratio0.65
Price to Book (P/B)-3.64
Price to Sales (P/S)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
$9.60Price Target Upside8.97% Upside
Rating ConsensusHold
Number of Analyst Covering1
Youdao Business Overview & Revenue Model
Company DescriptionYoudao, Inc., an internet technology company, provides online services in the field of content, community, communication, and commerce in China. It operates through three segments: Learning Services, Smart Devices, and Online Marketing Services. The company provides various learning content, applications, and solutions, which cover topics and target people from various age groups for their learning needs through its websites and mobile applications. It offers online knowledge tools, which include Youdao and other dictionaries and translation tools; learning services consisting of tutoring, fee-based premium, and other services; STEAM courses, adult and vocational courses, and other courses, such as China University MOOC; smart devices, such as Youdao Dictionary Pen, Youdao Listening Pod, Youdao Smart Lamp, Youdao Pocket Translator, and Youdao Super Dictionary; education digitalization solutions comprising technologies and solutions licensed to schools or enterprise customers, such as Youdao Smart Learning Terminal, and Youdao Smart Cloud; and online marketing services. In addition, the company provides online courses comprising Youdao Premium Courses and NetEase Cloud Classroom, as well as technical support to the variable interest entities (VIEs). Youdao, Inc. was founded in 2006 and is headquartered in Hangzhou, China. Youdao, Inc. is a subsidiary of NetEase, Inc.
How the Company Makes MoneyYoudao makes money through a multi-faceted revenue model primarily based on its online education services, premium subscriptions, and sales of smart learning devices. A significant portion of its revenue is generated from its online courses, which cover various subjects and are offered to students ranging from K-12 to adult learners. Another key revenue stream is the sale of subscriptions for its premium language learning and dictionary apps. Additionally, Youdao generates income from its educational hardware products, such as smart pens and other learning devices. The company also benefits from strategic partnerships with educational institutions and other technology firms, which help to expand its reach and enhance its technological capabilities.
Youdao Earnings Call Summary
Earnings Call Date:May 15, 2025
(Q1-2025)
| % Change Since: 1.50%|
Next Earnings Date:Aug 14, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mixed view. Record operating income and significant growth in AI-driven subscription services and smart devices were key highlights. However, these were offset by declines in net revenue and learning services, along with reduced gross margins. The positive developments were substantial but did not fully counterbalance the negative trends.Q1-2025 Updates
Positive Updates
Record Operating Income
Operating income reached a Q1 record of RMB 104.0 million, surging 247.7% year-over-year.
AI Product Developments
Launched Confucius-o1, an open-source reasoning model, and Youdao MagicBox, an AI-powered ad creative suite.
Growth in AI-Driven Subscription Services
AI-driven subscription services generated nearly RMB 70 million in Q1 sales, growing over 40% year-over-year.
Smart Devices Revenue Growth
Smart Devices segment delivered RMB 190.5 million in Q1 revenues, representing a 5.1% year-over-year growth.
Strong Market Reception for Youdao SpaceOne
Initial inventory of Youdao SpaceOne sold out within 10 days, contributing to over 20% year-over-year growth in dictionary pen revenue.
Net Income Surge
Net income attributable to ordinary shareholders was RMB 76.7 million, an increase of over 6x from the same period of last year.
Negative Updates
Net Revenue Decline
Net revenues were RMB 1.3 billion, declining 6.7% year-over-year, primarily due to decreased learning services revenue.
Learning Services Revenue Drop
Net revenues from Learning Services segment declined by 16.1% year-over-year.
Gross Margin Reduction
Gross margin for learning services decreased from 63.1% to 59.8% and for online marketing services from 34.3% to 30.5% year-over-year.
Operating Cash Outflow
Operating cash outflow was RMB 255.5 million, although it narrowed by 34.7%.
Company Guidance
During Youdao's first quarter 2025 earnings call, the company reported significant strides in profitability and strategic advancements despite a 6.7% decline in net revenues to RMB 1.3 billion. Operating income reached a Q1 record of RMB 104 million, marking a 247.7% year-over-year increase. The company's AI native strategy led to the launch of new products, including Confucius-o1, an open-source reasoning model, and the AI-powered Youdao MagicBox. The Learning Services segment saw a 16.1% revenue decline, narrowing the previous quarter's decline by 5 percentage points, with digital content services generating RMB 410.8 million. The Smart Devices segment grew by 5.1% year-over-year to RMB 190.5 million, while online marketing services posted a 2.6% increase to RMB 505.4 million. Gross margin for online marketing services was 30.5%, with future stabilization expected between 25% to 35%. Operating cash outflow improved, narrowing by 34.7% to RMB 255.5 million. The company aims for sustained profit growth and operating cash flow breakeven for the full year 2025.Youdao Financial Statement Overview
Summary
Youdao's financial performance indicates strengths in revenue growth and gross profitability. However, it faces significant challenges in net profitability, leverage, and cash flow generation. The negative equity and cash flow issues present potential risks that need addressing for long-term financial health.Income Statement
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.65
Positive
Balance Sheet
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.50
Neutral
Cash Flow
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.40
Negative
| Breakdown | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
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 |
| EBITDA | 178.46M | -439.92M | -680.33M | -856.37M | -749.42M |
| Net Income | 82.21M | -549.93M | -739.78M | -926.09M | -1.75B |
Balance Sheet | |||||
| Total Assets | 1.81B | 1.67B | 2.28B | 2.63B | 2.07B |
| Cash, Cash Equivalents and Short-Term Investments | 655.78M | 526.66M | 1.02B | 826.88M | 1.19B |
| Total Debt | 1.85B | 1.60B | 1.44B | 1.21B | 957.75M |
| 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 | -79.70M | -456.00M | -672.88M | -1.41B | -358.42M |
| Operating Cash Flow | -67.91M | -438.14M | -603.12M | -1.35B | -321.56M |
| Investing Cash Flow | -13.59M | 125.57M | 125.82M | 47.07M | 760.97M |
| Financing Cash Flow | 228.51M | -18.94M | 184.65M | 1.78B | 26.56M |
Youdao Technical Analysis
Neutral
8.81
Price Trends
8.88
Negative
8.51
Positive
7.61
Positive
Market Momentum
0.02
Negative
51.51
Neutral
82.29
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DAO, the sentiment is Neutral. The current price of 8.81 is above the 20-day moving average (MA) of 8.72, below the 50-day MA of 8.88, and above the 200-day MA of 7.61, indicating a neutral trend. The MACD of 0.02 indicates Negative momentum. The RSI at 51.51 is Neutral, neither overbought nor oversold. The STOCH value of 82.29 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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 (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $1.37B | 11.32 | 15.78% | <0.01% | 1.79% | 24.44% | |
68 Neutral | $1.04B | ― | -27.17% | ― | 5.43% | 14.22% | |
67 Neutral | $1.41B | ― | -10.84% | ― | 7.26% | 39.62% | |
62 Neutral | $898.95M | ― | -36.29% | ― | 58.34% | -602.43% | |
61 Neutral | €9.62B | 17.31 | 3.87% | 2.08% | 4.38% | -25.22% | |
56 Neutral | $1.05B | 51.93 | 25.15% | ― | -2.04% | ― | |
55 Neutral | $1.14B | 35.79 | -13.54% | ― | 4.87% | -198.67% |
* Technology Sector Average
Performance Comparison
DAO
Youdao
8.81
5.21
144.72%
GOTU
Gaotu Techedu
3.70
-1.20
-24.49%
AFYA
Afya
15.07
-2.88
-16.04%
COUR
Coursera
8.92
1.42
18.93%
UDMY
Udemy Inc
7.03
-1.64
-18.92%
KLC
KinderCare Learning Companies Inc
10.21
-17.83
-63.59%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.