10 Worst Chinese Stocks to Buy Right Now According to Short Sellers

1) TAL Education Group (NYSE:TAL)

Short % of Float (8/30/2024): 22.08%

Number of Hedge Fund Holders: 33

TAL Education Group (NYSE:TAL) is one of the leading K-12 after-school tutoring providers in China. It offers tutoring services to students.

As of 30^th August 2024, the company’s short % of float stood at ~22.08%, with short sellers anticipating that TAL Education Group (NYSE:TAL) is expected to see margin pressures. This is mainly due to concerns about regulatory pressures and competitive forces in the education sector, which might lead to inconsistent revenue growth. Moreover, short sellers highlighted that growth in expenses might also weigh over its stock price.

In 1Q 2025, TAL Education Group (NYSE:TAL)’s cost of revenues went up by 43.4% to US$200.0 million from US$139.5 million in 1Q 2024, with selling and marketing expenses increasing by 25.4% to US$122.4 million in the current quarter.

However, Wall Street analysts believe that TAL Education Group (NYSE:TAL) has plans to invest in learning services, enhance its offline learning center capacity, and integrate artificial intelligence technology into its learning devices. Collectively, these measures are expected to reduce costs and boost revenues and earnings. With the target of expanding in the overseas market, the company continues to launch new products in the online enrichment space to offer innovative and interactive learning experiences.

Market experts are optimistic about the company’s enrichment learning program, which should aid in strong revenue growth across product categories.

As per Wall Street analysts, the shares of TAL Education Group (NYSE:TAL) have an average price target of $17.78. Insider Monkey’s 2Q 2024 data highlighted that 33 hedge funds held stakes in TAL Education Group (NYSE:TAL), with the stakes amounting to $356.9 million.

While we acknowledge the potential of TAL as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than the ones mentioned on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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