Here is why Youdao Inc (DAO) stock plummeted in the after-hours on Friday?

TMDI stock
TMDI stock

Youdao Inc. (DAO) shares declined 5.47% in after-hours on Friday, August 20, 2021, and closed the weekly trading at $9.50. In the regular trading session of Friday, DAO’s stock gained 3.82%. DAO shares have fallen 72.31% over the last 12 months, and they have moved up 7.49% in the past week. Over the past three months, the stock has lost 58.25%, while it has slid down 67.09% over the past six months.

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DAO provided further updates on regulatory developments

On August 19, 2021,  Youdao, Inc (DAO) said that the Beijing Municipality Government and the Beijing Municipal Committee of the Communist Party of China jointly issued the Beijing Municipality’s Measures to Further Reduce the Burden of Homework and After-School Tutoring on Students in Compulsory Education in Beijing to implement the requirements outlined in the Opinions on Further alleviating the burden of homework and after-school tutoring for students in compulsory education, published in July by the PRC central government.

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According to the new measurements,

  • No new provider of after-school tutoring services on academic subjects in China’scompulsory education system will be approved.
  • Existing academic AST providers shall all be re-registered as non-profit organizations.
  • Tuition fees for Academic AST shall follow the guidelines from the government to prevent any excessive charging or excessive profit-seeking activities.

The new guidelines were issued jointly by the General Office of the Communist Party of China Central Committee and the General Office of the State Council on July 24, 2021.

DAO recent financial results announcement

On May 18, 2021, Youdao, Inc (DAO) reported its unaudited financial results for the first quarter ended March 31, 2021.

Q1 2021 financial highlights

  • DAO reported net revenues of 3 billion(US$204.5 million) in Q1 2021 compared to RMB541.4 million for the same period of 2020.
  • The gross margin was 57.3% in Q1 2021 compared with 43.5% for the same period in 2020.
  • Total operating expenses were 1 billion(US$166.1 million) in Q1 2021, compared with RMB411.7 million for the same period of last year.
  • It suffered an operating loss of 9 million(US$49.0 million) in Q1 2021 compared with RMB176.0 million for Q1 2020.
  • Non-GAAP basic and diluted net loss per ADS was 60(US$0.40) in Q1 2021 compared with RMB1.45 in Q1 2020.
  • Youdao’s cash, cash equivalents, time deposits, and short-term investments totaled 2 billion(US$333.7 million) on March 31, 2021, compared to RMB1.2 billion as of December 31, 2020.

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Due to new regulations, online learning providers in China is facing enormous pressure which is resulting in poor stock market performance. DAO stock can further go down in the coming days.


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