Citi analyst Mark Li upgraded GSX Techedu to ‘buy’ from ‘sell’ with a price target of $56, down from $66, according to The Fly. The upgrade follows a 42% share plunge on fears of government regulation in China.
Local news outlet Sina News reported there was potential AST regulation regarding control of the number of players in the market, tuition prices, and time which sent GSX shares down.
Citi believes that if online AST penetration speed is lower by 60% due to potential regulation, GSX can achieve 45% topline growth this year and potentially higher margins.
Li believes market fear is ‘overdone’ although he still maintained a cautious view of the regulation.
Li also opened a 30-Day ‘Positive Catalyst Watch’ as he anticipates more clarity and shares recovery after the plunge.GSX Techedu stock is currently gaining. GSX: NYSE is up 6.36% on premarket.