GSX Techedu stock outperformed the broader market despite a 50% plunge in H2

GSX Techedu stock outperformed the market despite a 50% plunge in H2
Updated: 12 Dec, 2020
2 mins read

Shares of the technology-driven education company GSX Techedu (NYSE: GSX) outperformed the broader market index amid strong future fundamentals and robust growth in revenue.

Early this week, the online Chinese education service provider has received an $870 million investment from certain investors who agreed to buy newly issued Class A ordinary shares.

GSX GSX Techedu Inc. daily Stock Chart
GSX Techedu stock performance. Finviz chart

GSX Techedu stock price is up 219% in the past twelve months despite the recent selloff. Its shares are currently trading around $61, down significantly from an all-time high of $131 that it had hit in August.  

Lofty valuations impacted share price rally

GSX Techedu stock has lost almost half of its value in the past five months due to concerns over increasing competition and lofty valuations. Several analysts including the Asian desk of Credit Suisse had slashed its ratings to Underperform from Neutral when Chinese education stock traded above the $100 level.

Credit Suisse has provided a $71 price target, which indicates an upside from the current price of $61 a share. Meanwhile, the stock is trading close to Wall Street’s average stock price target of $62.

Revenue growth supports GSX Techedu stock

The Chinese education stock is likely to benefit from improving revenue numbers. Its September quarter revenue of $300 million jumped by 252.9% year over year and topped the analyst’s estimates by $10 million. The revenue growth is mainly driven by a 282% year over year increase in revenues of online K-12 courses.

On top, the company has been showing improvement in margins. Its third-quarter gross profit margin came in at 74.4% from 71.9% in the year-ago period.

Moreover, the company expects the extension of revenue growth momentum into the final quarter of this year, with a forecast for 120% increase from the past year period.

“Regardless of the intense competition today, we still see vast potential in the online education industry and are fully prepared to explore all possibilities based on the solid foundation that we have built over the past years,” Larry Xiangdong Chen, GSX’s founder, Chairman, and CEO said.

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Justinas Baltrusaitis

Justin crafts insightful data-driven stories on finance, banking, and digital assets. His reports were cited by many influential outlets globally like Forbes, Financial Times, CNBC, Bloomberg, Business Insider, Nasdaq.com, Investing.com, Reuters, among others.