Oppenheimer Raises Price Target On New Oriental Education & Technology Group (EDU)

Oppenheimer & Co. is raising its price target on shares of New Oriental Education & Technology Group EDU to $125 from $109 and has an Outperform rating on shares after the company reported better than expected earnings. In a note to clients, Oppenheimer writes, "We're encouraged by EDU's robust F2Q11 revenue growth of 56.3% y/y to $95.7M, beating both our estimate and the Street. Further, we view positively that EDU has started to focus on expenses, though y/y margin expansion will likely wait till F1Q12. In addition, we think EDU's strategy of opening more smaller-sized, cost effective "fill-in" L/Cs in big cities' less populated regions will help increase overall margins and utilization. We remain confident that EDU will deliver 30%+ y/y revenue growth, supported by ASP growth of >20% for U-Can/overseas test prep and strong expansion on VIP class offerings. Raise PT to $125 from $109." Shares of EDU lost 30 cents yesterday to close at $107.41, a loss of 0.3%.