Among the most popular online courses in this pandemic year is one titled How to Learn Online. Nearly everyone from kindergartners to advanced degree candidates have had to spend some (or most or all) of their class time online. Many of these courses are offered by colleges and universities through services like Coursera and edX.
However, three publicly traded education and training companies also have seen a sharp pickup in their businesses this year. Two are based in Beijing and offer after-school programs for K-12 students, both online and in learning centers across China. The U.S.-based company offers a variety of online services. All three have market caps of more than $10 billion, and all have seen their share prices rise by at least 50% in 2020.
With vaccines coming available to stop the spread of COVID-19, will demand for online education slip as pre-collegiate students return to classrooms, or will the gains that online instruction made this year carry over to more growth in 2021?
TAL Education Group (NYSE: TAL) operates more than 1,600 learning and service centers in China and one in the United States. The company offers K-12 after-school tutoring services throughout China, both in-person and online. The company came public in 2010 at $10 per American depositary share (ADS) and traded under the ticker symbol XRS. The company changed its ticker symbol to TAL in 2016. Each ADS is equal to two shares of Class A common stock.
The ADSs traded below the initial public offering price until October of 2013, but since then they have never looked back. The stock rose to an all-time high this year, up nearly 3,000% since the IPO, and now trades up about 2,700%. Its market cap is around $43.2 billion.
Earlier this week, the company announced a $3.3 billion investment led by Silver Lake Partners. The investment comprises $2.3 billion in convertibles notes and $1 billion in newly issued Class A common shares.
So far in 2020, the ADSs have added more than 48% to trade around $72 apiece. The 52-week range is $44.24 to $83.68. The stock trades about 14% below the 52-week high and have an implied upside of just over 15% based on the consensus price target of $82.86. The company’s fiscal year ends in February, and for the 2022 fiscal year, it trades at 72 times expected earnings of $1.15 per ADS. At this multiple, TAL could be characterized as overvalued, but analysts remain bullish.