EDU - Hedgeye says go long New Oriental Education and short Koolearn in new pair trade recommendation

Hedgeye fired off a new pair trade idea with a recommendation to go long New Oriental Education & Technology Group Inc. ( NYSE: EDU ) and short Koolearn Technology Holding Limited ( OTCPK:KLTHF ).

Analyst Felix Wang noted that Koolearn, which is the online stub of New Oriental, rocketed as much as 12X in the past month in Hong Kong trading.

Wang said that while the euphoria eased a bit after a large Tencent sale of shares, Koolearn remains in hype mode with eeryone talking about its new livestreaming growth opportunity with its platform. "While the new look of Oriental Selection is very timely given the retreat of major KOLs in e-commerce livestreaming e.g. Viya, Austin Li, Cherie, Luo Yonghao, we sense some irrational exuberance," he noted.

Oriental Selection is seen providing Koolearn with a needed boost, but the market is already pricing in more than 70% revenue growth for blended 2023-2024 which is called too aggressive.

"Meanwhile, the parent company of Koolearn and its largest shareholder and funder, New Oriental, ( EDU ) showed much more modest gains in the past month."

Hedgeye sees 30% downside for Koolearn and 30% upside for New Oriental Education ( EDU ).

Shares of EDU traded 0.27% higher in premarket trading on Thursday vs. the 52-week trading range of $8.40 to $70.50.

For further details see: