Yesterday, TAL Education (NYSE: TAL) delivered an earnings beat and the share price took off. The stock gained 17.7% for the day.

The share price had marched downward in the days leading up to the earnings release. Some investors worried about disappointment. However, TAL’s results showed the worries were overblown.

Results Top Expectations

For TAL’s fiscal third quarter (ended November 2017), the company posted revenue of $433.3 million, about 3% better than consensus estimate and 66.3% better than one year ago. It earned profit of $0.07 per American Depositary Share (ADS). Adjusted for stock option expense and asset impairment costs, earnings per ADS was $0.09 a share, beating The Street’s estimate for $0.07.

(As a side note, three ADS of TAL represents one underlying Chinese share of the stock.)

TAL continues to increase its student body, as quarterly enrollment grew 85%. Enrollments in its core, small classes under the brand name Peiyou increased by 92%.

TAL added 16 learning centers during the quarter and ended November with 579 learning centers in 38 cities. It will likely add another dozen or some learning centers in the fourth quarter.

Online Classes Growing Very Quickly

While still a small part of the overall business, online courses now contribute 7.8% of revenue, up from 4.7% a year ago. TAL reports that its new live broadcasting feature has been a key driver of the online success. We expect the live streaming capability to continue to be play an important role in future growth.

The downside to the online growth is that the average revenue per user (ARPU) for online classes is about 40% lower than the offline classes. However, the online classes open up access to students who may have be otherwise unable to attend classes in person whether due to distance or cost. Additionally, TAL has been successfully increasing online enrollment while increasing the ARPU for online students. Online ARPU increased 61.7% year over year in dollar terms.

Seasonality Could Slightly Throw Off Comparison

Deferred revenue increased to $1.07 billion at the end of November, from $680 million a year ago, a 58% increase. Deferred revenue are important; it is the tuition students pay in advance. TAL then books the revenue when the classes are delivered.

This matters because the timing of the Chinese New Year holiday this year will throw off the way TAL realizes its revenue compared to last year. Because the Chinese New Year holiday occurs in February this year, the start of the spring semester will begin in TAL’s first quarter of fiscal 2019. This will cause TAL to proportionately book revenues in the next quarter.

In 2017, because Chinese New Year occurred in January, and the spring semester started in late February, some spring semester revenue was booked to the fiscal fourth (current) quarter. In other words, seasonality will hurt TAL a bit in comparing this fourth quarter to the last one. So that’s something to keep in mind when TAL reports results again in April.

Gross margins, a concern from the previous quarter, recovered to 49%, which given the company’s aggressive investments in technology and capacity expansion, is good. The company will continue to invest heavily in its online business, so some reduction in the margin in future quarters is possible.

As we have mentioned before, the price action in TAL will likely continue to be volatile because expectations are high, but we fully expect the price to trend upward despite intermittent ups and downs. The company’s strong enrollment momentum is strong and there is still plenty of untapped cities in China. The success of its live streaming feature also bodes well for the continued expansion of its reach.

Our readers should already have shares. Nevertheless, we boost our suggested buy-up-to price to $36 today.

The FDA Grants High-Priority Status

AngioDynamics (NASDAQ: ANGO) also enjoyed a strong day on Thursday. The share price climbed 4.1%.

The FDA has granted Expedited Access Pathway (EAP) status for AngioDynamics’ NanoKnife System for the treatment of Stage III pancreatic cancer. This means the FDA will give high priority to the application and will work with the company closely in the review process to reach a decision quickly so that patients may gain access to the treatment as soon as possible.

The NanoKnife System is minimally invasive. It uses electrical pulses to open pores in target cells’ membranes to kill them. The patient’s body then naturally removes the dead cells over the next few weeks.

The system is currently approved for surgically removal of soft tissue. An expedited approval to specifically treat pancreatic cancer—notoriously difficult to treat—clearly opens a major door for AngioDynamics. The company is evaluating the system for more uses.

A New Stock Joins Portfolio

Earlier, we added Despegar.com (NYSE: DESP) to our portfolio. The initial suggested buy-up-to price is $35. We will cover the company in detail in next week’s update.