TAL Education Stock Slides Nearly 9% as Chinese Shares Retreat on Consumer Worries Ahead of Quarterly Results

NEW YORK — Shares of TAL Education Group fell nearly 9% in early trading Wednesday, joining a broad decline in Chinese stocks a week before the Beijing-based education company reports quarterly results.

The New York-listed shares dropped $1.01 to $10.57, giving the company a market value of about $5.9 billion. Trading volume was about 1.7 million shares in the first part of the session. The company did not release any specific news that explained the drop.

China stocks under pressure

The decline came as Chinese stocks fell in Shanghai and Hong Kong. The Shanghai Composite Index lost 0.6%, and Hong Kong's Hang Seng Index fell 0.9%.

Market participants said investors were using consumer-related stocks to express doubts about China's domestic demand ahead of third-quarter earnings. Battery maker CATL fell about 10% after reporting much slower profit growth, citing fierce competition and slower car sales in China.

China's economy grew 4.5% in the third quarter, faster than expected, but the growth came mainly from exports while household spending stayed weak. That has led many investors to expect little new economic stimulus from Beijing in the near term.

Sophie Altermatt, an economist at Julius Baer, said in a note that Beijing's focus remains on "technological advancement, industrial upgrading and greater self-sufficiency" instead of boosting short-term growth.

That is a challenge for companies such as TAL, which depend on families' willingness to spend on education.

Recent weakness

Wednesday's drop adds to recent losses. TAL fell 4.3% on Oct. 16 and lost more than 6% that week. It closed at $11.89 on Monday before falling again.

Over the past year, the stock has traded between $8.88 and $13.37. With Wednesday's decline, it is now well below the top of that range.

Solid growth, cheap valuation

TAL has grown strongly since China's 2021 crackdown on for-profit tutoring forced it to overhaul its business. The company now focuses on learning devices, enrichment programs and online and offline learning services that comply with the rules.

For the fiscal year ended in February, TAL reported revenue of about $3.01 billion, up nearly 34% from the year before. Revenue in its most recent quarter grew about 32% from a year earlier.

Some analysts have warned that growth is slowing, citing cautious expansion of its learning center network, broader economic challenges in China and rising costs for parts used in its learning devices.

The stock trades at about 7.4 times trailing earnings, far below its five-year median, which reflects investor caution about Chinese consumer stocks and lingering regulatory risks in education.

Analysts are mostly positive. According to Zacks, the average short-term price target is about $15.52, well above the current price.

Earnings ahead

TAL will report results for its fiscal second quarter, which ended Aug. 31, on Oct. 29. Investors will look for:

signs of continued enrollment growth, demand for its learning devices, whether competition and rising costs are hurting profit margins.

The summer quarter is usually one of the busiest periods for education companies in China because students take enrichment courses during school vacation.

Until then, analysts expect TAL's stock to keep moving with broader sentiment toward Chinese markets and the outlook for consumer spending.