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Gaotu Techedu (GOTU)
NYSE:GOTU
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Gaotu Techedu
(NYSE:GOTU)
Rating:61Neutral
Price Target:
$4.00
▲( 5.26% Upside)
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. SPDR S&P 500 ETF (SPY)
Market Cap
$925.67M
Dividend YieldN/A
Average Volume (3M)1.60M
Price to Earnings (P/E)―
Beta (1Y)1.63
Revenue Growth58.34%
EPS Growth-602.43%
CountryUS
Employees14,381
SectorTechnology
Sector Strength76
IndustryEducation & Training Services
Share Statistics
EPS (TTM)0.07
Shares Outstanding139,864,940
10 Day Avg. Volume2,365,352
30 Day Avg. Volume1,599,595
Financial Highlights & Ratios
PEG Ratio4.31
Price to Book (P/B)4.68
Price to Sales (P/S)0.00
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
$3.99Price Target Upside5.00% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering6
Gaotu Techedu Business Overview & Revenue Model
Company DescriptionGaotu Techedu Inc. (GOTU) is a leading online education company based in China, primarily focused on providing K-12 after-school tutoring services. The company offers a wide range of educational products and services, including online live courses in various subjects. Gaotu Techedu leverages advanced technologies such as artificial intelligence and big data analytics to enhance the learning experience and improve educational outcomes for students.
How the Company Makes MoneyGaotu Techedu makes money primarily through tuition fees charged for its online courses. The company offers different pricing plans based on the subject, grade level, and duration of the course. Revenue is primarily generated from the K-12 segment, where parents pay for their children to attend live online classes. In addition to K-12 tutoring, Gaotu may also offer courses for professional and vocational education, contributing to its revenue streams. The company's earnings are influenced by factors such as student enrollment numbers, course pricing strategies, and operational efficiencies. Gaotu Techedu may also engage in partnerships or collaborations with educational content providers and technology platforms to enhance its offerings and expand its market reach.
Gaotu Techedu Financial Statement Overview
Summary
Gaotu Techedu shows strong revenue growth and maintains a stable balance sheet with low leverage, but profitability challenges persist as reflected in negative margins and cash flow issues. The company must focus on improving operational efficiency and cash generation to enhance financial health.Income Statement
Gaotu Techedu has experienced significant revenue growth from 2023 to 2024, with a revenue increase of 53.8%. However, the company remains unprofitable, as indicated by negative EBIT and net income margins. The net profit margin stands at -23.0%, and the EBIT margin is -25.9%. Although gross profit margins are healthy at 68.1%, the overall profitability is affected by high operating costs.45
Neutral
Balance Sheet
The company has a solid equity base with an equity ratio of 33.2%, indicating a stable financial structure. The debt-to-equity ratio is low at 0.25, reflecting conservative leverage. However, the return on equity is negative due to ongoing losses, posing a risk to shareholder value. Cash reserves remain strong, supporting liquidity.60
Neutral
Cash Flow
Gaotu Techedu's cash flow position is weak, with zero free and operating cash flow reported for 2024. Despite improvements in operating cash flow in 2023, the lack of free cash flow growth and zero cash flow in the latest period raise concerns about the company's ability to generate cash from operations.40
Negative
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 4.55B | 2.96B | 2.50B | 6.56B | 7.12B | Gross Profit |
| 3.10B | 2.17B | 1.80B | 4.16B | 5.36B | EBIT |
| -1.18B | -149.01M | -118.05M | -2.94B | -1.76B | EBITDA |
| -1.13B | -94.76M | -47.30M | -2.83B | -1.70B | Net Income Common Stockholders |
| -1.05B | -7.30M | 13.17M | -3.10B | -1.39B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 3.17B | 2.89B | 3.74B | 3.50B | 7.69B | Total Assets |
| 5.83B | 5.41B | 4.88B | 5.02B | 10.69B | Total Debt |
| 492.24M | 188.15M | 82.52M | 356.05M | 796.76M | Net Debt |
| -828.87M | -447.91M | -737.39M | -372.89M | 441.54M | Total Liabilities |
| 3.89B | 2.31B | 1.78B | 2.14B | 4.96B | Stockholders Equity |
| 1.93B | 3.11B | 3.10B | 2.88B | 5.73B |
| Cash Flow | Free Cash Flow | |||
| 0.00 | 312.90M | 243.88M | -4.46B | 319.20M | Operating Cash Flow |
| 0.00 | 353.70M | 373.74M | -4.19B | 603.27M | Investing Cash Flow |
| 0.00 | -423.98M | -1.09B | 4.81B | -5.60B | Financing Cash Flow |
| 0.00 | -90.48M | 0.00 | -100.61M | 5.27B |
Gaotu Techedu Technical Analysis
Positive
3.80
Price Trends
3.24
Positive
2.89
Positive
3.03
Positive
Market Momentum
0.21
Negative
63.60
Neutral
40.15
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 3.8 is above the 20-day moving average (MA) of 3.48, above the 50-day MA of 3.24, and above the 200-day MA of 3.03, indicating a bullish trend. The MACD of 0.21 indicates Negative momentum. The RSI at 63.60 is Neutral, neither overbought nor oversold. The STOCH value of 40.15 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 (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $7.89B | 20.02 | 10.36% | ― | 18.73% | 26.72% | |
74 Outperform | $3.35B | 11.64 | 31.14% | ― | 1.26% | 140.30% | |
73 Outperform | $1.40B | ― | -10.84% | ― | 7.26% | 39.62% | |
61 Neutral | $925.67M | ― | -36.29% | ― | 58.34% | -602.43% | |
61 Neutral | $1.04B | ― | -27.17% | ― | 5.43% | 14.22% | |
60 Neutral | $11.56B | 10.24 | -7.04% | 2.94% | 7.46% | -10.54% | |
60 Neutral | $1.09B | 53.98 | 25.15% | ― | -2.04% | ― |
* Technology Sector Average
Performance Comparison
GOTU
Gaotu Techedu
3.80
-2.54
-40.06%
EDU
New Oriental Education Tech
46.96
-31.49
-40.14%
LAUR
Laureate Education
21.86
5.83
36.37%
DAO
Youdao
9.05
5.50
154.93%
COUR
Coursera
8.55
0.70
8.92%
UDMY
Udemy Inc
6.77
-2.40
-26.17%
Gaotu Techedu Earnings Call Summary
Earnings Call Date:May 15, 2025
(Q1-2025)
| % Change Since: 0.00%|
Next Earnings Date:Sep 04, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong revenue growth, robust profitability, and successful integration of AI in educational services. However, the negative operating cash flow and decreased revenue from specific segments were concerning. Overall, the positive aspects of growth and strategic advancements outweigh the negatives.Q1-2025 Updates
Positive Updates
Strong Revenue Growth
Revenue increased by approximately 58% year-over-year to nearly 1.5 billion RMB, surpassing market expectations.
Robust Profitability
Operating profit reached 34.8 million RMB with a net income of 124.0 million RMB. On a non-GAAP basis, net income was 137.3 million RMB with a net margin of 9.2%.
Successful Share Repurchase Program
136 million RMB was allocated to the share repurchase program, with the accumulated total amount reaching 460 million RMB, representing 9.0% of total outstanding shares.
AI Integration and Product Innovation
AI was deeply integrated into educational products and services, leading to improvements in user experience and learning outcomes.
Expansion in Learning Services
Learning services contributed over 95% of net revenues, with non-academic children services emerging as a significant growth engine.
Negative Updates
Negative Operating Cash Flow
The operating cash flow for the quarter was negative, primarily due to the payment of 2024 annual bonuses and increased labor costs.
Decreased Revenue from College Students and Adults
Educational services for college students and adults showed a decrease year-over-year in revenue.
Company Guidance
During Gaotu Techedu's first quarter 2025 earnings call, the company reported significant financial achievements and strategic advancements. Revenue surged by approximately 58% year-over-year, reaching nearly 1.5 billion RMB, while operating profit stood at 34.8 million RMB with a net income of 124.0 million RMB. On a non-GAAP basis, net income was 137.3 million RMB, reflecting a net margin of 9.2%. The company repurchased shares worth approximately 136 million RMB, representing 9.0% of total outstanding shares, and held cash, cash equivalents, and investments totaling about 3.5 billion RMB. Gaotu's strategic initiatives, including integrating AI into educational products, have driven revenue growth, operational efficiency, and profitability, with the company achieving a 90% retention rate in its programming courses. Furthermore, Gaotu continues to focus on enhancing shareholder value with a newly approved share repurchase program of up to $100 million over the next three years.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.