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Why GSX Techedu Shares Gained on Tuesday

By Jon Quast - Jan 19, 2021 at 12:48PM

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A Wall Street analyst says it's time to buy this stock.

What happened

Shares of Chinese online-education company GSX Techedu (GOTU 1.02%) were rising today after an analyst with CLSA upgraded the stock to a buy. As of 12:50 p.m. EST, the shares were up 9%.

So what

CLSA analyst Youngrin Kim upgraded GSX Techedu stock to a buy today, according to Street Insider. A buy call is encouraging to investors by itself. But it's doubly encouraging because Kim had previously been bearish about GSX Techedu.

A chalkboard displays a chart on which dollar signs get progressively larger over time.

Image source: Getty Images.

Kim's buy call for GSX Techedu stock is a rare vote of confidence from Wall Street these days. According to analysts tracked by TipRanks, none currently recommend buying it. Four recommend holding while two recommend selling.   

Now what

General lack of confidence from Wall Street is likely due to ongoing investigations into GSX Techedu. The Securities and Exchange Commission is reportedly investigating the company for allegedly inflating sales. Management denies these allegations and claims to have begun pursuing a third-party audit prior to the launch of the SEC investigation. (As is the case with many international stocks, GSX Techedu's prior results are all unaudited.) But it presents enough risk to keep many investors away.

If GSX Techedu's financial results are all independently confirmed, then Kim could wind up being right about the future direction of the stock.  

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Stocks Mentioned

Gaotu Techedu Inc. Stock Quote
Gaotu Techedu Inc.
GOTU
$1.98 (1.02%) $0.02

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