Youdao downgraded to Neutral at Citi following recent rally

Citi analyst Brian Gong downgraded Youdao (DAO) to Neutral from Buy with a price target of $8.10, up from $7. Youdao’s share price has rallied recently, which the firm attributes to investors’ interests in its “decent ads growth” driven by expansion into new verticals, strong RTA revenue growth, and application of AI technologies. The firm has adjusted its 2024, 2025 and 2026 revenue estimates to reflect strong momentum on ads, but slower-than-expected learnings service growth, and while it applauds Youdao’s progress on the ads business and margin improvement, it argues that “most positives could be largely priced in” after the recent strong rally.