Why GSX Techedu Is Tumbling 10% Today

What happened

Shares of GSX Techedu (NYSE: GSX) were falling nearly 10% in afternoon trading Thursday despite China Merchants Securities analyst Tommy Wong upgrading the Chinese remote-learning company's stock from hold to buy.

So what

Typically a big upgrade by an analyst, not to mention a hike in the price target which implies the stock should double in value, would send most stocks soaring, especially one as volatile as GSX Techedu.

Girl looking at laptop screen.

Image source: Getty Images.

However, the distance-learning company went in the other direction on no discernIble news. That suggests GSX could be poised for a reversal in the days ahead, and perhaps significantly so, since Wong set his price target at $51 per share. As GSX had closed just under $30 a share yesterday, there's some 70% upside in the stock, and with shares down 10% today, the ceiling has been raised even higher.

Now what

Wild swings in the stock are not unknown to GSK Techedu investors, but it has yet to recover from the massive block trade by a mystery investor at the end of March that saw 12.8 million shares offered at a discount causing GSX shares to plummet 20%. The stock has continued to trade lower since.

GSX has also suffered from allegations of fraud by short sellers such as Muddy Waters that contend most of the education stock's users are robots.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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