What happened
Shares of GSX Techedu (GSX +0.51%) rose 24.3% in December, according to data from S&P Global Market Intelligence. There wasn't much in the way of news for the education-technology company in the month, but the stock posted big gains as the broader Chinese tech market rallied.
Slowing economic growth and uncertainty stemming from trade tensions with the U.S. have put pressure on Chinese stocks, but the country's stock market recorded big gains last month as the two sides moved closer to deescalation on the trade front. New tariffs were stopped from going into effect, and the countries announced that they had agreed to terms for a "phase one" trade deal, slated to be signed on Jan. 15.
Image source: Getty Images.
So what
With a more favorable outlook on trade signaling better growth prospects for the Chinese economy, investors grew more bullish on GSX Techedu shares. The company posted very encouraging third-quarter results early in November, and signs of a more favorable macroeconomic environment for the business resulted in another impressive run for the stock last month. Online education is a market that has huge room for growth, and the prospects are particularly enticing in the Chinese market.
In the third quarter, GSX's net revenues climbed 461.5% year over year to 557 million yuan (roughly $80 million), gross billings rose 419.5% to 880 million yuan (roughly $126.3 million), and total enrollments rose 240.2% to 820,000 students. Non-GAAP (adjusted) net income for the period rose from 1 million yuan (roughly $144,000) in the prior-year period to 20.1 million yuan (roughly $2.9 million).
Now what
GSX stock has continued to climb in January, with shares up roughly 6.4% in this month's trading so far.
The company is guiding for fourth-quarter sales to come in between 806 million yuan (roughly $115 million) and 826 million yuan (roughly $118.6 million), representing year-over-year growth of roughly 348.4% at the midpoint of the target.
GSX Techedu now has a market capitalization of roughly $5.5 billion. It's valued at roughly 7.7 this year's expected sales and 57 times the year's expected earnings.
