Gaotu Techedu (GOTU) AI Stock Analysis

• Market Cap: $789.62M
• Dividend Yield: N/A
• Average Volume (3M): 1.70M
• Price to Earnings (P/E): ―
• Beta (1Y): 1.55
• Revenue Growth: 51.50%
• EPS Growth: -70812.50%
• Country: US
• Employees: 14,381
• Sector: Technology
• Sector Strength: 65
• Industry: Education & Training Services
• EPS (TTM): -0.56
• Shares Outstanding: 139,864,940
• 10 Day Avg. Volume: 1,110,067
• 30 Day Avg. Volume: 1,699,021
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.00
• Price to Cash Flow (P/CF): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $2.35
• Price Target Upside: -27.69% Downside
• Rating Consensus: Moderate Sell
• Number of Analyst Covering: 2

Gaotu Techedu's overall stock score reflects its robust revenue growth and strategic advancements in AI, which are offset by ongoing profitability challenges and weak cash flow. While the technicals suggest a neutral position, the valuation is constrained by negative earnings. Future profitability and operational improvements are essential for enhancing the stock's appeal.

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 Business Overview & Revenue Model

Company Description

Gaotu Techedu Inc., a technology-driven education company, provides online K-12 after-school tutoring services in the People's Republic of China. Its K-12 after-school tutoring courses cover various K-12 academic subjects, including mathematics, English, Chinese, physics, chemistry, biology, history, geography, and political science. The company also provides foreign language courses comprising English and Japanese, as well as English test preparation courses for students taking post-graduate entrance exams; and professional courses primarily for working adults preparing for professional qualification exams, such as teacher's qualification, the Chartered Financial Analyst designation, securities qualification exams, and other exams. In addition, it offers admission courses for admission tests, including national graduate entrance examination, civil service examinations, and others; and Gaotu App, an interactive learning app to various student groups. Further, the company provides other courses, including offline business consulting courses to enhance management skills for principals and other officers of private education institutions; and develops and sells smart devices, such as multi-function translation pen, as well as teaching and learning tools, which includes smart learning machine. The company was formerly known as GSX Techedu Inc. and changed its name to Gaotu Techedu Inc. in June 2021. Gaotu Techedu Inc. was incorporated in 2014 and is headquartered in Beijing, the People's Republic of China.

How the Company Makes Money

Gaotu 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.

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.

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.

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

• Technical Analysis Sentiment: Positive
• Last Price: 3.25
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

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 3.25 is above the 20-day moving average (MA) of 2.83, above the 50-day MA of 3.13, and above the 200-day MA of 3.12, indicating a bullish trend. The MACD of <0.01 indicates Negative momentum. The RSI at 63.12 is Neutral, neither overbought nor oversold. The STOCH value of 96.89 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for GOTU.

Gaotu Techedu Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
LAUR	74 Outperform	$3.08B	10.63	30.98%	―	5.55%	185.01%
COUR	73 Outperform	$1.36B	―	-10.84%	―	7.26%	39.62%
EDU	72 Outperform	$8.07B	20.59	10.36%	―	18.73%	26.72%
UDMY	61 Neutral	$1.02B	―	-30.77%	―	7.91%	22.07%
Sector *	59 Neutral	$10.75B	10.37	-6.64%	3.00%	7.30%	-12.02%
DAO	54 Neutral	$1.04B	91.56	25.15%	―	3.01%	―
GOTU	54 Neutral	$789.62M	―	-41.45%	―	51.50%	-70812.50%