GSX Techedu Inc. (GSX) stock prices were up 2.7% as of market close on April 27th, 2021, having bumped the price up to USD$31.99 at the end of the trading day. Subsequent premarket fluctuations saw the stock price climb 5.97% to USD$33.90.
Increases in Revenue
GSX reported a massive net revenue of nearly USD$341 million for the fourth quarter of 2020, representing a 136.5% increase from net revenues reported in the same time period of the previous year. This significant improvement is attributed to the surge in the number of online K-12 paid course enrollments, which showed a year-over-year improvement of 112.8% bringing total enrollments as of the end of Q4 2020 up to 2,139,000.
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Consumer Shift Towards e-Learning
Effective allocation of resources towards sales and marketing efforts is primarily responsible for the increase in first-time paid course enrollments, while increases in retention can be attributed to the company’s high standard of teaching as well as the selection of optimized services offered by GSX. The adversities imposed by the COVID-19 pandemic and consequent government mandates and restrictions have also been responsible for an overall uptrend in remote learning and teaching.
Growth Driven Costs of Revenue
As the company grows and hires more instructors and tutors, costs of compensation also increase, as do posts related to learning materials and rental spaces. As such, the cost of revenue rose from USD$30.23 million in Q4 of 2019 to USD$95.06 million for the fourth quarter of 2020, representing a very significant year-over-year increase of 214.5%.
Strategizing for the Future
In an effort to consolidate long-term growth at the expense of diminished gross profit margins, GSX has allocated more resource in expanding its workforce and improving teaching quality with the hiring of increasingly qualified professionals. The drive to improve students’ overall learning experience will lay a strong base for the company’s future long-term development. In light of this strategy, GSX reported a gross profit margin of 72.1% compared to 79% reported in Q4 2019, despite gross profits having increased by 115.8% to USD$245.93 in the fourth quarter of 2020.
Hopeful Outlook for GSX
With the pandemic continuing to drag on and the global education landscape perpetually suffering and bring forced to adapt, the scope of online education is greater than ever. As evidenced by the numbers, GSX has experienced substantial growth as schools and education facilities are shut down as a part of government regulations to curb the spread of the coronavirus. Current and prospective investors are hopeful that the company will continue to leverage its resources to ensure long-term growth and increases in shareholder value.
