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Why GSX Techedu Stock Popped Today

By Jon Quast - Apr 28, 2021 at 12:13PM

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Could this stock nearly double from here?

What happened

Shares of GSX Techedu (GOTU 1.02%) popped on Wednesday after an analyst completely changed their opinion about the company. As of noon EST, the stock was up 12%.

So what

According to The Fly, an analyst with Goldman Sachs raised their outlook for GSX Techedu stock. Previously, the analyst had recommended selling. Now they recommend buying shares of this distance learning company operating in China. To go along with the buy rating, a $70 price per share target was placed on the stock, implying 94% more upside even after today's pop.

A businessman draws an exponential growth curve over a line graph.

Image source: Getty Images.

Now what

GSX Techedu stock is down roughly 75% from all-time highs set earlier this year. Many prominent short sellers have come out against the company, alleging fraud. In Goldman Sachs' note, these ongoing concerns were acknowledged. However, recent financial results make it worth the risk in the opinion of the analyst.

For 2020, GSX Techedu reported revenue in local currency equivalent to over $1 billion -- an increase of 237% from 2019. That's stunning growth especially for a revenue base this large. While the company wasn't profitable during the year, it seems Goldman Sachs is judging it based on this top-line growth. And considering it trades at a price-to-sales ratio of around nine, it's easy to see why they believe the risk could be worth it.

Anyone following this stock going forward should note that GSX Techedu plans to change its ticker symbol on the New York Stock Exchange from "GSX" to "GOTU" soon.

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Stocks Mentioned

Gaotu Techedu Inc. Stock Quote
Gaotu Techedu Inc.
$1.98 (1.02%) $0.02
The Goldman Sachs Group, Inc. Stock Quote
The Goldman Sachs Group, Inc.
$297.20 (-0.68%) $-2.03

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