TAL - TAL Education stock rallies after BofA calls a bottom

TAL Education Group ( NYSE: TAL ) soared after Bank of America upgraded the Chinese education stock to a Neutral rating from Underperform following a solid quarter.

Analyst Lucy Yu noted that TAL's solid profitability came as a surprise, which is on the back of rising revenue scale, cost savings and seasonality. Yu and team boosted their full year revenue forecast for TAL with a lower net loss estimate for FY23. Looking ahead, BofA expects profitability could further improve and a profit could br eported in FY24.

BofA's outlook for TAL: "We look for close to USD1bn revenue and minor non-GAAP net loss for FY23. Learning service could continue to be the major contributor, driven by improving quality and expansion of subject offerings. Margins will expand on operating leverage and better retention rate. Content solution could outgrow other segments (from a low base), but to be loss-making in FY23 given investment in R&D. Lastly, technology solution growth could be the slowest among all lines, but with relatively higher margins."

Shares of TAL were up 7.32% on Monday at 10:58 a.m. For the year, the education stock has risen more than 23%.

Read more about TAL's FQ2 results and dig into the earnings call transcript.

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