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Oct. 21, 2020, 2:39 p.m. EDT

GSX Techedu's stock plunges, after Credit Suisse analyst turns bearish, slashes price target

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By Tomi Kilgore

Shares of GSX Techedu Inc. /zigman2/quotes/212597937/composite GSX -3.45% plunged 30% in active afternoon trading Wednesday, after Credit Suisse analyst Alex Xie turned bearish on the China-based online education company, citing intensified competition and mistakes made in summer promotions. Trading volume was 14.2 million shares, compared with the full-day average of about 3.3 million shares. Xie cut his rating to underperform from neutral, and slashed his price target to $71 from $95. Xie said he expects third-quarter margins will suffer from intensified competition, and expects "record low conversion rates" in the summer promotion due to the company's mistaken focus on the normal-price summer programs. "The summer holiday was short and parents got promotional classes from multiple companies easily," Xie wrote in a note to clients. "A number of parents chose to rotate on promotional classes without actually paying for the whole summer." He said in comparison, privately held rival Yuanfudao realized the issue early, and gave up revenue growth and margins in the summer and directly converted sales leads to normal-price programs for the fall semester. Meanwhile, the stock has still more than tripled (up 229.6%) year to date, while the iShares MSCI China ETF /zigman2/quotes/206267952/composite MCHI -0.60% has advanced 22.6% and the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.18% has gained 6.9%.

/zigman2/quotes/212597937/composite
US : U.S.: NYSE
$ 62.16
-2.22 -3.45%
Volume: 2.48M
Dec. 2, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$15.35 billion
Rev. per Employee
$47,562
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/zigman2/quotes/206267952/composite
US : U.S.: Nasdaq
$ 79.96
-0.48 -0.60%
Volume: 7.13M
Dec. 2, 2020 4:00p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,669.01
+6.56 +0.18%
Volume: 2.37B
Dec. 2, 2020 5:07p
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