Market Analysts see Youdao Inc. [DAO] gaining to $10. Time to buy?

Youdao Inc. [NYSE: DAO] loss -14.08% or -1.19 points to close at $7.26 with a heavy trading volume of 3268381 shares. The company report on July 26, 2021 that Youdao Provides Update on PRC Regulatory Policy.

Youdao, Inc. (“Youdao” or the “Company”) (NYSE: DAO), a leading intelligent learning company in China, noted that the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued a set of guidelines on July 24, 2021, aiming to ease the burden of excessive homework and after-school tutoring for students receiving compulsory education (the “Guidelines”). The Guidelines, among other things, require that all institutions offering online after-school tutoring on academic subjects in compulsory education be registered as non-profit organizations, obtain approval from the relevant regulatory authorities, and comply with various operational requirements with respect to class hours, faculty qualifications, tuition standards, advertising and others. In addition, the Guidelines prohibit all such tutoring businesses from raising funds through stock exchange listings or other capital-related activities. Foreign investments in school curriculum-based tutoring institutions through variable interest entity (VIE) arrangements, mergers and acquisitions or otherwise are also prohibited. Listed companies are banned from raising capital through equity offerings to invest in businesses offering tutoring on academic subjects in compulsory education. The Guidelines require that all businesses that have already violated these rules take corrective measures as appropriate.

Although the interpretation and implementation of the Guidelines remain uncertain, we expect the Guidelines to have material impacts on our K-12 course business, financial condition and corporate structure. As we are currently exploring measures to comply with the requirements in the Guidelines for our K-12 course business, we will continue to seek guidance from regulatory authorities to improve our operations in strict compliance with all laws and regulations, fulfil our social responsibilities, provide our users with high-quality, innovative products and services, and promote the long-term development of China’s education industry.

It opened the trading session at $7.73, the shares rose to $8.30 and dropped to $7.02, the range by which the price of stock traded the whole day. The daily chart for DAO points out that the company has recorded -79.81% loss over the past six months. However, it is still 10.26% higher than its most recent low trading price.

If we look at the average trading volume of 468.33K shares, DAO reached to a volume of 3268381 in the most recent trading day, which is why market watchdogs consider the stock to be active.

Here is what top equities market gurus are saying about Youdao Inc. [DAO]:

Daiwa Securities have made an estimate for Youdao Inc. shares, keeping their opinion on the stock as Underperform, with their previous recommendation back on July 27, 2021. The new note on the price target was released on July 27, 2021, representing the official price target for Youdao Inc. stock. Previously, the target price had yet another drop from $45.70 to $13, while Jefferies kept a Hold rating on DAO stock. On June 29, 2021, analysts decreased their price target for DAO shares from 35 to 25.

The Average True Range (ATR) for Youdao Inc. is set at 2.11, with the Price to Sales ratio for DAO stock in the period of the last 12 months amounting to 2.61. Price to Free Cash Flow for DAO in the course of the last twelve months was 67.76 with Quick ratio for the last quarter at 0.80.

Trading performance analysis for DAO stock

Youdao Inc. [DAO] fell into the red zone at the end of the last week, falling into a negative trend and dropping by -66.54. With this latest performance, DAO shares dropped by -70.86% in over the last four-week period, additionally sinking by -79.81% over the last 6 months – not to mention a drop of -81.11% in the past year of trading.

Overbought and oversold stocks can be easily traced with the Relative Strength Index (RSI), where an RSI result of over 70 would be overbought, and any rate below 30 would indicate oversold conditions. An RSI rate of 50 would represent a neutral market momentum. The current RSI for DAO stock in for the last two-week period is set at 18.14, with the RSI for the last a single of trading hit 12.59, and the three-weeks RSI is set at 23.36 for Youdao Inc. [DAO]. The present Moving Average for the last 50 days of trading for this stock 22.33, while it was recorded at 14.72 for the last single week of trading, and 27.13 for the last 200 days.

Youdao Inc. [DAO]: A deeper dive into fundamental analysis

Operating Margin for any stock indicates how profitable investing would be, and Youdao Inc. [DAO] shares currently have an operating margin of -57.01 and a Gross Margin at +45.91. Youdao Inc.’s Net Margin is presently recorded at -55.34.

Reflecting on the efficiency of the workforce at the company, Youdao Inc. [DAO] managed to generate an average of -$136,310 per employee. Receivables Turnover for the company is 11.53 with a Total Asset Turnover recorded at a value of 1.49.Youdao Inc.’s liquidity data is similarly interesting compelling, with a Quick Ratio of 0.80 and a Current Ratio set at 0.90.

An analysis of insider ownership at Youdao Inc. [DAO]

There are presently around $166 million, or 64.60% of DAO stock, in the hands of institutional investors. The top three institutional holders of DAO stocks are: ORBIS ALLAN GRAY LTD with ownership of 12,081,564, which is approximately 17.659% of the company’s market cap and around 4.21% of the total institutional ownership; CORONATION FUND MANAGERS LTD., holding 2,720,359 shares of the stock with an approximate value of $19.75 million in DAO stocks shares; and UBS ASSET MANAGEMENT AMERICAS INC, currently with $11.33 million in DAO stock with ownership of nearly New of the company’s market capitalization.

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Positions in Youdao Inc. stocks held by institutional investors increased at the end of August and at the time of the August reporting period, where 36 institutional holders increased their position in Youdao Inc. [NYSE:DAO] by around 5,972,381 shares. Additionally, 19 investors decreased positions by around 1,272,370 shares, while 7 investors held positions by with 15,674,515 shares. The mentioned changes placed institutional holdings at 22,919,266 shares, according to the latest SEC report filing. DAO stock had 17 new institutional investments in for a total of 3,324,787 shares, while 9 institutional investors sold positions of 77,659 shares during the same period.

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