Consumer Discretionary Oct 22, 2020 11:12 AM (GMT+8) · EqualOcean
There are two things that happened with the Chinese education platform.
First, the leak of the next quarter’s financial report. GSX Techedu's management is going to significantly lower guidance for upcoming third-quarter earnings; this after the company confirmed last month that Securities and Exchange Commission was investigating the company.
Second, Credit Suisse Group analyst said in a research report that the educational software developer is losing momentum due to increased competition and the 'mistakes' GSX made during its summer promotions. The analyst predicts that GSX’s conversion rate for this promotion will hit a record low due to similar offers from other companies. The report states that 'many parents choose to take turns in promotional courses' without actually paying for the entire summer.
Although we believe that the plunge in stock is more because of the leaked rumor rather than the downgrade by the Credit Suisse analyst.