Decent Financials To Push Youdao Toward Profitability In Burgeoning Industry

In addition to online courses for the adult segment and K12, the firm develops education apps and makes smart learning devices such as the Dictionary Pen, its third generation released in December. Its courses are supercharged with innovative features such as interaction, tailored curriculum and exercises, vertical strategy playbook, and even role-playing games.

Possible risks 

Although investing in Chinese companies seems attractive, there are risks resulting mainly from regulatory intervention. We do have examples of Chinese companies that have either been delisted or are going through investigations. It is more rational for investors to allocate a small portion of their portfolios to Youdao in the hopes of securing huge returns compared to the buying price.

Competition

With huge interest from investors and good financials of Youdao other tech giants, such as Alibaba Group, ByteDance, and Tencent, have stepped foot into the sector over the past year, intensifying competition in certain areas.  

Among startups, Zuoyebang and Yuanfudao both backed by strong investors are huge threats. In October, Yuanfudao, which provides K-12 after-school tutoring, as well as pre-school and adult courses, closed its G round of financing Its valuation reached USD 15.5 billion. According to the company's press release, in October, Yuanfudao counted 3.7 million students and was the largest in China.

We believe that NetEase-backed Youdao's focus on quality, innovation, and technology along with decent financials positions it on a remarkable growth trajectory compared to its peers. 

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