Recently, China International Capital Corporation (CICC) released a research report that conducted an in-depth analysis of the performance and future development trends of Dao (NYSE: DAO) in the third quarter of 2024, and provided expected guidance. CICC maintains its "outperform the industry" rating on Youdao, raising its target price by 30% to $6.00, corresponding to 0.8 times the 2025 market to sales ratio.
The research report pointed out that Youdao's performance in the third quarter exceeded market expectations, with revenue increasing by 2.2% year-on-year to 1.57 billion yuan, and non general standard attributable net profit reaching 88.66 million yuan, achieving significant profit improvement compared to the same period last year.
The research report emphasizes that Youdao's advertising business has maintained high growth, especially its online marketing service business, which has exceeded expectations with a year-on-year revenue growth of 45.6%, mainly due to the increase in demand for RTA and KOL advertising. Considering that the growth prospects of advertising business are more optimistic than expected, the P/E ratio of advertising business will be raised from 5 times to 13 times.
In the field of intelligent hardware, NetEase Youdao also performed well, with a revenue of 315 million yuan in the third quarter, a year-on-year increase of 25.2%. This growth is mainly due to the launch and market performance of the Youdao Dictionary Pen X series new products. In terms of learning services, although revenue decreased by 19.2% year-on-year, the company stated that this was due to focusing resources on high ROI customer acquisition channels and adopting a more cautious advertising strategy during the summer.
CICC mentioned that Youdao Company recorded an operating profit of 107 million yuan, corresponding to an operating profit margin of 6.8%, achieving its first operating profit in the third quarter. It is expected that the company will achieve positive operating profit for the entire year of 2024.
In addition, well-known securities firms Huatai Securities and Jerreries have both commented on Youdao's third quarter performance and unanimously given a "buy" rating, with target prices set at $5.92 and $6.20, respectively. As of the close of November 19th Eastern Time, NetEase Youdao's stock price was at $5.10. (Zhang Yang)