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Rise Education’s shares jump after Morgan Stanley upgrade

As student enrollment is recovering, Rise is exploring the online-merge-offline education model.

Shares of Rise Education (NASDAQ: REDU) rose 52% in Tuesday’s session after Morgan Stanley analyst Sheng Zhong upgraded the company to “equal weight” and the stock from “neutral” to “buy,” with a USD 6.50 price target. Trading closed at USD 7.45, 28.45% higher than on Monday.

Although most of China’s online education and educational technology companies benefited from the coronavirus outbreak, Rise Education failed to grasp the opportunity. Its business model is mainly reliant on in-class teaching activities. After learning centers were shut on January 19, student enrollment plummeted, causing a drop in revenues of more than RMB 200 million (USD 28.8 million) in the first quarter.

Rise Education reported last week that enrollment is recovering quickly in Q2, up 149% quarter-on-quarter, as the country returns to normal. Even enrollment for online courses saw an uptick to 1,185 in the second quarter of 2020, compared with 669 in Q1 and 2,996 in Q2 of 2019.

Founded in 2007, Rise Education offers after-school English teaching and tutoring services through its subsidiaries to students aged between three to eighteen. The company follows the American K-12 curriculum and operates in China’s junior English language training market.

Rise Education runs in-person learning centers but also offers classes online. Currently, it has a total of 485 learning centers, 88 of which are directly managed and 397 franchised in cities including, Shanghai, Beijing, Guangzhou, Shenzhen, and Wuxi.

Towards a new model

In response to the outbreak, the company launched an online teaching platform, called Rise+, which uses the online-merge-offline education model. The model allows students to learn anytime, anywhere, by providing a connection between formal and informal learning. Rise aims to build a solid infrastructure for the transformation of its operations based on this model in the future.

“We have seen the strong upward enrollment momentum continuing into the third quarter,” chairwoman and CEO Lihong Wang said last week. “I firmly believe that we are well-positioned to capture the tremendous opportunities ahead and emerge as a leading OMO educator in China.”