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Why Youdao Stock Skyrocketed 66.9% in June

By Keith Noonan – Jul 5, 2020 at 1:00PM

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The Chinese online education stock has climbed roughly 152% in 2020.

What happened

Shares of Youdao (DAO 6.81%) gained 66.9% in June, according to data from S&P Global Market Intelligence. The online education company soared after its parent company NetEase (NTES 0.43%) listed on the Stock Exchange of Hong Kong (SEHK).

DAO Chart

Image source: YCharts.

NetEase issued new common stock and also had its public debut on the SEHK on June 11, and its valuation climbed roughly 8.4% last month. Youdao posted much bigger gains than NetEase, but its stock movement trends tracked closely in line with those of its parent company. 

A child at a computer.

Image source: Getty Images.

So what

NetEase's listing on the Hong Kong exchange was a success and raised $2.7 billion in funds for the company. Youdao accounts for a relatively small portion of NetEase's total sales, but its online education services stand as the parent company's fastest growing business segment. It's possible that Youdao will eventually be listed on the SEHK as well.

Chinese online education stocks have generally performed very well this year, with conditions created by the novel coronavirus spurring increased demand. Youdao stock may have gotten a boost last month from news that a resurgence of new coronavirus cases occurred in the country. 

Now what

Youdao stock has lost some ground in July's trading. The stock is down roughly 5% in the month so far, but it appears that investors taking profits after last month's huge gains are the reason for the dip rather than any company-specific news. 

DAO Chart

Image source: YCharts.

Youdao's total sales climbed roughly 140% year over year to reach $76.5 million in the first quarter, and online learning services rose 226.4% to reach $62.4 million. Youdao's second quarter ended in June, and the company's education segment is likely to post another quarter of stellar growth. 

Youdao trades at roughly 24 times this year's expected earnings and 6 times expected sales.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends NetEase. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Youdao, Inc. Stock Quote
Youdao, Inc.
$4.55 (6.81%) $0.29
NetEase, Inc. Stock Quote
NetEase, Inc.
$77.88 (0.43%) $0.33

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