Why did New Oriental stock surge on Monday? An important upgrade

New Oriental Education & Technology stock soared on Monday after an important turn to bullishness from a key analyst.

In a note to clients on Monday morning, JPMorgan upgraded shares to “Overweight” from “Neutral” as valuation looks more attractive. Of course, there remain concerns about regulatory crackdowns and the potential for further governmental pressures on the industry. However, the bank’s analysts indicated much of this downside is likely baked in at this point.

“We view EDU’s relative and absolute holding – presently pricing in a distressed scenario (i.e., market cap ~40% below its current net cash) – may come to be appreciated as sentiment on Chinese equities and ADR finds the bottom, which should allow investors to play at least for its (cash) assets.”

JPMorgan assigned a price target of $24 to shares, suggesting significant upside even after Monday’s pop.

The upgrade is the second such positive note from a Wall Street analyst in the past week.

Author: Tech Daily Newsletter, Seeking Alpha

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