Analyst upgrades New Oriental, stock climbs

NEW YORK -- Shares of New Oriental Education & Technology Group climbed more than 5 percent Monday as an analyst raised her rating on the Chinese education company because of the likelihood of a favorable outcome from an investigation by the Securities and Exchange Commission.

THE SPARK: Oppenheimer's Ella Ji boosted New Oriental to "Outperform" from "Perform" and provided a $25 price target.

THE BACKGROUND: New Oriental said in July that it was being investigated by the SEC and believed that the probe related to whether a company in which it has a stake, Beijing New Oriental Education & Technology Co., was properly included in its financial statements. New Oriental said at the time that it planned to cooperate with the SEC on the matter.

THE ANALYSIS: Ji said in a client note that New Oriental has since filed additional data and received a positive report from auditor Deloitte & Touche Tohmatsu. It was also informed by a division of the SEC that it had no objection to the company consolidating its financial statements with Beijing New Oriental.

In addition, the analyst said that the company's fundamentals appear to have remained strong over the past three months during the investigation.

SHARE ACTION: New Oriental's stock gained 90 cents, or 5.2 percent, to $18.04 in afternoon trading. The shares have traded between $9.41 and $30.97 over the past year. For the year to date, the stock is down 30 percent.