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Here's Why GSX Techedu Stock Is Trading Higher Before Earnings

By Jon Quast – Sep 1, 2020 at 3:27PM

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One analyst expects more revenue growth than the rest, but the price target still represents downside from today.

What happened

Shares of Chinese education company GSX Techedu (GOTU 11.11%) traded higher on Tuesday, after an analyst at J.P. Morgan raised his price target for the stock. The new price target comes just ahead of GSX Techedu's scheduled earnings report.

As of 3 p.m. EDT today, GSX Techedu stock is up 9% for the day, and up over 300% from where it started 2020 -- absolutely crushing the market over that span.

GSX Chart

GSX data by YCharts.

So what

According to the website The Fly, J.P. Morgan analyst DS Kim envisions robust results when GSX Techedu releases earnings on Wednesday at 8 a.m. EDT. Specifically, while consensus estimates expect 354% year-over-year revenue growth, Kim expects 370% growth, which would shatter expectations.

Kim raised the price target for GSX Techedu from $43 per share to $75, a whopping 74% hike. But it still carries a neutral rating. And considering the stock now trades around $93 per share, the price target actually represents significant downside.

A dollar bill folded into the shape of an upward arrow.

Image source: Getty Images.

Now what

It's important to note that Kim is one of the few bulls for GSX Techedu. The international company has been accused of fraud by multiple research firms, and short interest is over 10%, according to Yahoo! Finance. Therefore, it's hard to predict how the stock will react when it reports earnings. Bulls will likely see impressive growth, while bears will say the numbers can't be trusted. 

Jon Quast 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.

Stocks Mentioned

Gaotu Techedu Stock Quote
Gaotu Techedu
$1.40 (11.11%) $0.14

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