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Why GSX Techedu Shares Are Sinking

Shares of Chinese online tutoring company GSX Techedu Inc (NYSE: GSX) are pulling back to nearly a five-month low after the company reported its financial results for the third quarter.

What Happened: The Beijing-based company reported third-quarter revenue of 1.97 billion yuan ($289.532 million), representing roughly a 253% year-over-year increase.

Analysts, on average, had estimated revenues of $288.53 million for the quarter.

Gross billings increased 137.1% year-over-year.

Yet with operating expenses ballooning by about 500%, the company reversed from a profit of 0.01 yuan per share to a loss of 3.91 yuan or (57 cents) per share.

The company attributed the rising opex to higher customer acquisition costs in the wake of competition and extensive investment in its teaching staff, product design, content development and technology innovations.

The spending, the company said, is an important investment for the long-term future.

Related Link: Citron Calls GSX Techedu ‘Most Blatant Chinese Stock Fraud Since 2011,’ Company Says Report False

Why It’s Important: GSX Techedu has been a target for shorts who have accused the company of following a fraudulent business model.

GSX Price Action: The stock was down 20.73% at $56.56 at last check Friday.

Related Link: GSX Techedu IPO: What You Need To Know About The Chinese Education Company

© 2020 Benzinga does not provide investment advice. All rights reserved.

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