New Oriental Education partners with Tencent for English language app
Over the past two earnings calls, the disappointment of the second quarter and optimism of the third quarter have been boosted by the news that New Oriental will partner with tech giant Tencent to produce a range of English learning apps, which would see New Oriental expand its customer base, and Tencent enter into the lucrative online education business. On December 8, both firms announced that the uDA English app had been released, which is designed for middle school and university students to improve their English.
The app features a three-pronged approach, using a question scanner, an ability-adaptive exercise function, and interactive tutoring. Students will be able to contact with New Oriental’s teachers and can create study groups through the app. The firm believes that this will be a revolutionary way for students to study using online education, and will look to using the technology for other subjects.
New Oriental’s new English learning app
Management and risk description
New Oriental, along with rival TAL Education, tend to report earnings before other Chinese firms because their fiscal quarters end a month earlier than standard. Therefore we can expect that by the end of April, New Oriental will have released two earnings reports. The first of which will likely see management discuss the initial affect of the new app on revenues and profits, whilst the second earnings report will be the first quarter to include revenues from the app, so investors will be able see the detailed affect of the product. I have therefore given the trade a five-month horizon, in order to include both earnings calls.
New Oriental’s share price has fallen from $23.78 in October to its current price of $21.04, and a reason for this is the weak Chinese economic data over the past few months. We’ve seen this disappointing performance with most Chinese equities over the same period, and the risk is that this could continue.
— Edited by Adam Courtenay
For more on equities click here
Non-independent investment research
This investment research has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Further it is not subject to any prohibition on dealing ahead of the dissemination of investment research. Saxo Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. » Read more