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Why GSX Techedu Stock Jumped (Again) Today

By Steve Symington - Feb 19, 2020 at 5:06PM

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The Chinese education company extended yesterday's post-earnings gains.

What happened

Shares of GSX Techedu (GOTU -4.64%) soared 18.7% on Wednesday, extending its nearly 10% pop on Tuesday following the Chinese education specialist's strong fourth-quarter report.

So what

To be clear, there was no fresh news apart from yesterday's release that might have otherwise spurred today's gains. But it certainly helped that GSX stock had only just plunged more than 17% in last week's trading leading up to its quarterly update due to broader concerns over the effect of the coronavirus outbreak in the country.

Asian stock market data displayed on a large LED screen.

Image source: Getty Images.

Still, GSX investors had every reason to celebrate when its earnings press release hit the wires. Revenue grew 413% year over year to roughly 935 million Chinese yuan, while adjusted net income surged 616.7% to 197.8 million yuan, or 0.79 yuan per share. By comparison, most analysts were modeling significantly lower earnings of 0.62 yuan per share on revenue of 845.7 million yuan.

Now what

GSX management also told investors to expect revenue in the first quarter of 2020 ranging from 1.086 billion yuan to 1.106 billion yuan -- even the low end of which was well above consensus estimates calling for first-quarter revenue to be closer to 1.04 billion yuan.

"As 2020 unfolds, we continue to be committed to hiring and retaining top-notch teachers and talented professionals, investing significantly into technology and content development, and spending wisely in high ROI channels to expand and leverage our customer base, as we move to establish an enduring brand," added GSX's founding chairman and CEO, Larry Xiangdong Chen. "We will continue our growth with emphasis on effectiveness and profitability strategy as we have been doing over the past three years."

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Gaotu Techedu Inc. Stock Quote
Gaotu Techedu Inc.
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