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Gaotu Techedu Inc. (GOTU)
:GOTU
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Gaotu Techedu
(NYSE:GOTU)
52Neutral
Positive Factors
Product Diversification
Gaotu is executing a strategic pivot, diversifying its product portfolio while maintaining online education as its revenue mainstay.
Negative Factors
Financial Performance
Gaotu's 2QFY24 results underscore the company's struggle to reconcile aggressive expansion with financial viability, projecting a full-year net loss of approximately RMB1bn.
Profit Margin Pressure
The high school division faces margin pressure, with profitability expected to contract to ~15% from the previous 15-20% range, partly attributable to strategic discounting for new cohorts impacting near-term revenue.
Gaotu Techedu (GOTU) vs. S&P 500 (SPY)
Market Cap
$910.51M
Dividend YieldN/A
Average Volume (3M)3.38M
Price to Earnings (P/E)―
Beta (1Y)1.94
Revenue Growth35.93%
EPS Growth-641.17%
CountryUS
Employees7,767
SectorTechnology
Sector Strength45
IndustryEducation
Share Statistics
EPS (TTM)-0.56
Shares Outstanding144,375,950
10 Day Avg. Volume3,900,006
30 Day Avg. Volume3,381,849
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)8.88
Price to Cash Flow (P/CF)N/A
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$2.35Price Target Upside-32.28% Downside
Rating ConsensusModerate Sell
Number of Analyst Covering2
Gaotu Techedu Business Overview & Revenue Model
Company DescriptionGSX Techedu, Inc. is a technology-driven education company. Its core expertise is in online K-12 courses, and online K-12 large-class after-school tutoring service provider in China. The company's K-12 courses cover all primary and secondary grades. It also offers foreign language, professional and interest courses. The company was founded by Xiang Dong Chen in June 2014 and is headquartered in Beijing, China.
How the Company Makes MoneyGaotu Techedu generates revenue primarily through its online education platform, where it offers a variety of courses and educational content for different age groups and learning needs. The company's main revenue stream comes from tuition fees paid by students enrolled in its programs, particularly the K-12 after-school tutoring services. Additionally, Gaotu Techedu expands its revenue base by offering professional training courses and vocational education programs to adults seeking to enhance their skills. The company also explores strategic partnerships and collaborations with educational institutions and technology providers to broaden its service offerings and reach. These partnerships can include co-developing educational content or utilizing advanced technologies to improve the delivery and effectiveness of its courses.
Gaotu Techedu Financial Statement Overview
Summary
Gaotu Techedu presents challenges in profitability with declining revenue and operational inefficiencies, reflected in negative EBIT and EBITDA margins. Despite these issues, a strong balance sheet with low leverage and improved cash flow management offer some stability.Income Statement
Gaotu Techedu shows a challenging financial trajectory with declining revenue over the period. The revenue growth rate from 2022 to 2023 was 18.5%, indicating some recovery. However, the company remains unprofitable with a negative net profit margin of -0.25% in 2023. Despite a positive gross profit margin of 73.3%, EBIT and EBITDA margins remain negative, reflecting operational inefficiencies.48
Neutral
Balance Sheet
The balance sheet presents a stable financial position with a strong equity base. The equity ratio is 57.4%, indicating a solid proportion of assets financed by equity. The debt-to-equity ratio is relatively low at 0.06, showcasing low leverage and financial risk. Gaotu Techedu has maintained a stable equity position despite profitability challenges.65
Positive
Cash Flow
Cash flow analysis reveals a strong operating cash flow to net income ratio of 48.5, demonstrating robust cash flow generation relative to reported net losses. Free cash flow growth is positive from 2022 to 2023, indicating improved cash management. However, past negative free cash flow positions highlight historical cash flow volatility.60
Neutral
| Breakdown | |||||
| TTM | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 | Dec 2019 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 3.51B | 2.96B | 2.50B | 6.56B | 7.12B | 2.11B | Gross Profit |
| 2.48B | 2.17B | 1.80B | 4.16B | 5.36B | 1.58B | EBIT |
| -829.91M | -149.01M | -118.05M | -2.94B | -1.76B | 215.73M | EBITDA |
| -785.10M | -94.76M | -47.30M | -2.83B | -1.70B | 227.79M | Net Income Common Stockholders |
| -619.16M | -7.30M | 13.17M | -3.10B | -1.39B | 226.63M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 294.17M | 2.89B | 3.74B | 3.50B | 7.69B | 1.55B | Total Assets |
| 474.17M | 5.41B | 4.88B | 5.02B | 10.69B | 3.39B | Total Debt |
| 54.11M | 188.15M | 82.52M | 356.05M | 796.76M | 254.21M | Net Debt |
| 14.07M | -447.91M | -737.39M | -372.89M | 441.54M | 180.24M | Total Liabilities |
| 462.52M | 2.31B | 1.78B | 2.14B | 4.96B | 1.84B | Stockholders Equity |
| 11.65M | 3.11B | 3.10B | 2.88B | 5.73B | 1.56B |
| Cash Flow | Free Cash Flow | ||||
| 0.00 | 312.90M | 243.88M | -4.46B | 319.20M | 1.22B | Operating Cash Flow |
| 0.00 | 353.70M | 373.74M | -4.19B | 603.27M | 1.29B | Investing Cash Flow |
| 0.00 | -423.98M | -1.09B | 4.81B | -5.60B | -2.50B | Financing Cash Flow |
| 0.00 | -90.48M | 0.00 | -100.61M | 5.27B | 1.25B |
Gaotu Techedu Technical Analysis
Positive
3.47
Price Trends
2.54
Positive
2.65
Positive
3.51
Negative
Market Momentum
0.31
Negative
62.98
Neutral
53.90
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GOTU, the sentiment is Positive. The current price of 3.47 is above the 20-day moving average (MA) of 3.11, above the 50-day MA of 2.54, and below the 200-day MA of 3.51, indicating a neutral trend. The MACD of 0.31 indicates Negative momentum. The RSI at 62.98 is Neutral, neither overbought nor oversold. The STOCH value of 53.90 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for GOTU.
Gaotu Techedu Risk Analysis
Gaotu Techedu disclosed 77 risk factors in its most recent earnings report. Gaotu Techedu reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Gaotu Techedu Peers Comparison
Overall Rating
UnderperformOutperform
Sector (58)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $5.21B | 19.99 | 22.95% | ― | 13.13% | 56.75% | |
74 Outperform | $8.01B | 20.79 | 10.40% | ― | 34.42% | 28.54% | |
72 Outperform | $7.93B | 67.44 | 3.23% | ― | 55.62% | ― | |
58 Neutral | $21.35B | 9.96 | -19.72% | 2.38% | 5.03% | -22.83% | |
53 Neutral | $994.40M | 85.60 | 25.15% | ― | 5.51% | ― | |
52 Neutral | $910.51M | ― | -41.45% | ― | 35.93% | -641.17% | |
47 Neutral | $81.13M | ― | -147.16% | ― | -13.78% | -5297.96% |
* Technology Sector Average
Performance Comparison
GOTU
Gaotu Techedu
3.47
-4.37
-55.74%
LRN
Stride
120.03
58.11
93.85%
EDU
New Oriental Education Tech
47.23
-46.69
-49.71%
CHGG
Chegg
0.86
-7.17
-89.29%
TAL
TAL Education Group
13.01
0.28
2.20%
DAO
Youdao
8.26
3.77
83.96%
Gaotu Techedu Earnings Call Summary
Earnings Call Date: Feb 26, 2025 | % Change Since: 37.15% | Next Earnings Date: May 21, 2025
Earnings Call Sentiment Positive
The earnings call reflects a strong financial performance with significant revenue growth, improved profitability, and strategic advancements in AI integration. Despite increased operating expenses and a net loss, the company shows a robust cash position and expects profitability in the next quarter.Highlights
Significant Revenue Growth
Revenue increased by 82.5% year-over-year to nearly RMB 1.4 billion, with gross billings up by 69.0% to over RMB 2.1 billion.
Improved Profitability
Loss from operations narrowed by 20.6% with operating margin improving by 13.9 percentage points. Net operating cash inflow was RMB 783.6 million.
AI Integration and Technological Advancements
Breakthroughs in cognitive reasoning with AGI technologies like DeepSeek, enhancing learning effectiveness and boosting organizational performance.
High Retention Rates
Improvement in retention rates for new enrollments in both nonacademic tutoring and traditional learning services.
Strong Cash Position
Cash, cash equivalents, restricted cash, short and long-term investments totaled RMB 4.1 billion as of December 31, 2024.
Share Buyback
Allocated nearly US$47.5 million for share buybacks, including over 8.1 million ADS bought back for US$28.8 million in 2024.
Projected Profitability in Q1 2025
Confident in achieving profitability at the net profit level in Q1 2025 while maintaining fast revenue growth.
Lowlights
Operating Expenses Increase
Total operating expenses increased 52.2% year-over-year to approximately RMB 1.1 billion.
Net Loss
Net loss was RMB 135.8 million, and the net income margin was negative 9.8%.
Company Guidance
During Gaotu Techedu's fourth quarter and fiscal year 2024 earnings call, the company provided robust guidance for the upcoming fiscal year. The company reported a significant year-over-year revenue increase of 82.5% for the quarter, reaching nearly RMB 1.4 billion, with gross billings up by 69.0% to over RMB 2.1 billion. Operating margins improved by 13.9 percentage points, narrowing the loss from operations by 20.6%. The company's strategic focus on AI integration was highlighted as a key driver of enhanced learning experiences and operational efficiency. Looking forward to the first quarter of 2025, Gaotu expects revenues between RMB 1,408 million and RMB 1,428 million, representing a 48.7% to 50.8% increase year-over-year, while also aiming to achieve profitability at the net profit level. The company's strong cash position, with cash and investments totaling RMB 4.1 billion, supports its strategic initiatives and long-term growth plans.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.