Gaotu(US:GOTU)2024-08-09 02:01Investment Rating - The report assigns a "Buy" rating for the company, with a target price of $7.50, indicating a potential upside of 64.5% from the current price of $4.56 [1][10]. Core Insights - The company is expected to exceed revenue expectations in Q2 2024, with projected collections of 16.1 billion RMB, a year-on-year increase of 82%, driven primarily by the K12 business, which is expected to double in growth [1]. - The report anticipates a significant increase in marketing expenses due to strong collection growth and customer acquisition efforts during the summer, leading to an adjusted operating loss of 455 million RMB for Q2 2024 [1][2]. - The company is expected to maintain a high growth rate of over 60% in collections during Q3 2024, although revenue growth may be lower than collections due to various factors [1]. Financial Summary - Revenue projections for the company are as follows: 2,961 million RMB in 2023, 4,368 million RMB in 2024, 5,323 million RMB in 2025, and 6,291 million RMB in 2026, with year-on-year growth rates of 18.5%, 47.5%, 21.9%, and 18.2% respectively [3][11]. - The company is expected to incur a net loss of 675 million RMB in 2024, with a projected recovery to a profit of 237 million RMB by 2026 [3][11]. - The report highlights a significant increase in marketing expenses, projected to reach 2,684 million RMB in 2025, which will impact profitability [3][11]. Valuation - The valuation for the company's education business is adjusted to $7.50 per share based on a 20x P/E ratio for 2025, down from a previous estimate of $9.10 [2].