GOTU - Tal Education New Oriental drop after downgrades at Morgan Stanley on regulatory concerns

Jovanmandic/iStock via Getty Images Tal Education (TAL) fell almost 10% in premarket trading, New Oriental  (EDU) dropped 7.4% and 17 Education & Technology (YQ) declined 5.6% after Morgan Stanley downgraded the stocks and the Chinese after-school tutoring sector on potential bear case due to stricter regulations. Morgan Stanley cut it industry view to inline and base case sees 50% chance that tutoring hours will be partly cut, according to analyst Sheng Zhong. In this scenario, EDU and TAL could see an up to 58% revenue decline. In a bear case scenario, which Morgan Stanley gives a 45% probability, K9 after-school tutoring companies will "struggle" to keep operating with no tutoring on weekends, summer and winter holidays. K9 and K12 make up 55% and 80% of EDU's revenue and 80% and 100% of TAL's. Tal Education was double downgraded to underweight from overweight and the PT was cut to $21.50 from $75. New Oriental cut to equal-weight

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Tal Education, New Oriental drop after downgrades at Morgan Stanley on regulatory concerns