Tal Education, New Oriental, Gaotu cut to underweight at JPMorgan

Tal Education, New Oriental and Gaotu were cut to underweight at JPMorgan following reports on China cracking down on Chinese tutoring companies.

“While details of the measures remain debatable, the document, if true, will effectively make the sector un-investable in our view,” JPMorgan wrote in note.

The firm also said.

“The magnitude of the downside risk, and near complete opaqueness/uncertainty severely limit our ability to form a proper investment view,” JPMorgan said in the note.

Tal Education and Gaotu were cut to underweight from neutral, while, New Oriental received a two notch downgrade from underweight from overweight.

Tal Education plummeted 55% and New Oriental dropped 58% on a report that China is considering making Chinese tutoring companies non-profits. Gaotu Techedu plunged 59%.

China is considering making the tutoring companies no longer be allowed to raise capital or go public, according to a Bloomberg report, which cited people familiar. Foreign capital will also likely be barred from the sector.

In addition, the report says that vacation and weekend tutoring on school subjects will be banned, a concern that has hurt the tutoring stocks for the past several months.

Tal Education, New Oriental and Gaotu, formerly known as GSX, all said in statements that these new regulations haven’t been published and the companies haven’t received official notification of the the regulations.

Author: Josh Fineman, Seeking Alpha