Citi Reiterates Sell Rating on Gaotu Techedu (GOTU)

Citi analyst Alice Cai reiterated a Sell rating and $1.94 price target on Gaotu Techedu (NYSE: GOTU)

The analyst comments "Our Gaotu forecast revisions reflect revenue growth of 28%/25%/25% YoY for FY25/26/27E, with upward adjustments of 31%/18%/12% versus our previous estimates. However, our non-GAAP OP projections of RMB 589mn/558mn/474mn are significantly lower than Mgmt's RMB ~350mn guidance. The primary discrepancy stems from lease accounting mechanics. Mgmt's projected flat offline losses ignore basic lease accounting: leases signed in 2H24 will automatically generate full 12-month expenses in 2025 versus only 1-6 months in 2024, making year-over-year cost increases mathematically inevitable regardless of new expansion. We will reassess the company's offline progress around the summer vacation period and review our forecast accordingly. Reiterate Sell."

For an analyst ratings summary and ratings history on Gaotu Techedu click here. For more ratings news on Gaotu Techedu click here.

Shares of Gaotu Techedu closed at $3.61 yesterday.

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