Shares in GSX Techedu Down 3% Despite Third Quarter Growth
Wall Street investors were left unimpressed with the results of GSX despite soaring revenue and net income that has more than doubled.
Anthony Russo
Nov 05,2019,20:50

Shares in GSX Techedu Inc. (NYSE: GSX) slipped 3% to $15.78 per American depositary share on Tuesday afternoon, despite after the company reported substantial revenue growth and profit that more than doubled.

The Beijing-based after school tutoring service provider, said that in three months through September, revenue more than quintupled to 557 million yuan, up 462% year-over-year. Net income rose to 1.9 million yuan, compared with 700,000 yuan a year ago.

However, Wall Street investors were left unimpressed despite the growth, due to trade war uncertainties effecting the overall volatility of the markets.

The revenue soar was attributed to GSX’s growth in K-12 course enrollments and higher tuition fees in the third quarter. Student enrollments reached 820,000, up 240% year-over-year.

“Thanks to the continuous upgrading of our corporate and organizational capabilities, as well as effective execution of our marketing strategy, we observed the remarkable growth in paid course enrollments,” Shannon Shen, the chief financial officer of GSX said in a statement today.

GSX, which raised $207.9 million in its initial public offering in June, said in its prospectus, 30% of the proceeds would go towards improving students learning experience and educational content development.

Shen described the work of its teachers to CapitalWatch on IPO day in June "The interaction between teachers and students is very important. We built a system that makes our instructors into role models. On the other side, our tutors have daily communication with parents with daily Q&A and homework grading."

Founded in 2014, GSX offers its K-12 tutoring to primary and secondary grades. GSX’s courses cover foreign language, professional and interest courses, according to its website.

Larry Xiangdong Chen, the founder, chief executive officer, and chairman of GSX, said the company will proceed to focus on content development and technology.

“We will continue to invest strategically in our customer acquisition and R&D in 2019 and drive even greater engagement with our students and parents We will continue to have our unwavering focus on the online live large-class tutoring to reap financial rewards."

Looking ahead, the company expect to generate revenue in between the range of 806 million yuan and 826 million yuan in forth quarter, an increase of 343% to 354% respectively.

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