We recently compiled a list of the 10 Chinese Penny Stocks to Buy According to Analysts. In this article, we are going to take a look at where Gaotu Techedu Inc. (NYSE:GOTU) stands against other Chinese penny stocks to buy according to analysts.
The announcement of the Chinese stimulus has somewhat created interest among investors and market pundits. China’s local market reacted positively after the government announced that it would apply a ‘moderately loose’ strategy for monetary policy in 2025. This will be China’s first major shift in economic policy since 2011. The Chinese government could take a more proactive approach to fiscal policy to stabilize property and stock markets.
READ ALSO: 10 Best Canadian Stocks to Buy Under $10 and 10 Most Profitable European Stocks To Invest In.
China’s President Vows to Meet Growth Target
China’s president, Xi Jinping, has assured that the country will remain the world’s ‘growth engine’ and meet its GDP growth target of 5% in 2024. The Chinese government has taken bold steps to support its economy. Moreover, the stimulus has come at a time when the economy is struggling badly and there are potential tariff threats from the new U.S. administration. Despite that, China has been facing lower imports and exports, which greatly threatens the economy against Trump’s tariffs.
The outbound shipments saw a 6.7% growth in November, missing estimates by 8.5% and down from a 12.7% growth in October 2024. On top of that, the imports declined 3.9% in November, the worst performance for imports in nine months, as reported by Reuters.
China’s stimulus of $1.5 trillion, or nearly 10 billion yuan, to support its economy has given some hope. Further loosening the policy would support small businesses. However, for investors to be attracted to the Chinese stock market, something positive needs to happen, especially how the economy reacts to the policy during the first half of 2025.
“The actual delivery has disappointed high hopes several times already over the past two years. We are back to the tricky stage of waiting for actual numbers to see whether it lives up to expectations,” said Xin-Yao Ng, investment director on the Asian equities team at abrdn.
The Hang Seng Index has plunged over 3% over the last five days, as of December 17, while the CSI 300 index has dropped by nearly 1.50% in the last five days but it is up by almost 16% year to date. We can see the market’s mixed reaction to the recent events.
You can also visit and see 12 Cheap Chinese Stocks to Buy According to Hedge Funds.
A line of students working on their computers in an after-school tutoring center.
Our Methodology
To compile our list of the 10 Chinese penny stocks to buy according to analysts, we used a Finviz screener to list down all Chinese penny stocks under $5. We then picked the 10 stocks with the highest upside (over 25%) according to analysts, as of December 17. The list is ranked in ascending order of analysts’ estimated upside.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Gaotu Techedu Inc. (NYSE:GOTU)
Share Price (As of December 17): $2.40
Analysts Upside: 88.70%
Gaotu Techedu Inc. (NYSE:GOTU), previously known as GSX Techedu Inc., is a holding firm primarily involved in the provision of technology-driven education services in China. The company manages its operations through subsidiaries and offers online K-12 after-school tutoring services. Gaotu also offers foreign language, professional and interest courses.
Gaotu Techedu Inc. (NYSE:GOTU) is scaling its business rapidly and the product matrix is also improving gradually. The company has invested in upgrading its educational systems to enhance organizational capabilities and improve management practices. The company has increased its market share steadily through the improvement in customer acquisition channels. Since 2023, the company has focused on expanding and diversifying its customer acquisition channels, which has produced solid results in driving acquisition systems.
Gaotu Techedu Inc.’s (NYSE:GOTU) strategic moves revolving around its core business have helped in steady progress. During Q3 2024, the company increased its revenue by 53.1% year-over-year to almost RMB 1.2 billion while the gross balance soared by 67.2% over the year to nearly RMB 1.1 billion. A major development during the third quarter is the more balanced product offering. The company’s revenue stream is more diversified following the aggressive offline expansion. Gaotu’s non-academic tutoring and overseas exam preparation add more to the firm’s revenue, as it takes advantage of its brand and customer base to penetrate the offline market.
Gaotu Techedu Inc. (NYSE:GOTU) has a solid balance sheet, despite losing cash due to investment ramp-ups and share buybacks. The company announced share buybacks of over 120 million, however, GOTU’s liquidity position remains solid. By the end of Q3, the company had more than RMB 3.31 billion in cash and cash equivalents.
Overall, GOTU ranks 2nd on our list of Chinese penny stocks to buy according to analysts. While we acknowledge the potential of GOTU to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GOTU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.