Youdao, Inc. (NYSE:DAO): Are Analysts Optimistic?

Youdao, Inc. (NYSE:DAO) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Youdao, Inc., an internet technology company, provides online services in the field of content, community, communication, and commerce in China. The US$443m market-cap company announced a latest loss of CN¥550m on 31 December 2023 for its most recent financial year result. Many investors are wondering about the rate at which Youdao will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Check out our latest analysis for Youdao

According to the 8 industry analysts covering Youdao, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2024, before generating positive profits of CN¥79m in 2025. The company is therefore projected to breakeven just over a year from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 105% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving Youdao's growth isn’t the focus of this broad overview, however, keep in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one issue worth mentioning. Youdao currently has negative equity on its balance sheet. This can sometimes arise from accounting methods used to deal with accumulated losses from prior years, which are viewed as liabilities carried forward until it cancels out in the future. Oftentimes, losses exist only on paper but other times, it can be a red flag.

Next Steps:

There are too many aspects of Youdao to cover in one brief article, but the key fundamentals for the company can all be found in one place – Youdao's company page on Simply Wall St. We've also compiled a list of pertinent factors you should look at:

1. Valuation: What is Youdao worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Youdao is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Youdao’s board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.