Why GSX Techedu Stock Was Crushed on Wednesday

There are two things happening with Chinese education platform GSX Techedu (NYSE: GSX) today. First, the stock was downgraded by an analyst at Credit Suisse. But also floating around is an unsubstantiated rumor that GSX Techedu's management is going to significantly lower guidance for upcoming third-quarter earnings; this after the company confirmed last month that Securities and Exchange Commission was investigating the company. The stock was down 28% as of 11:15 a.m. EDT.

Credit Suisse analyst Alex Xie believes the online-education space in China is getting more competitive, according to The Fly. With more competition, the chance for organic sales growth goes down, in theory. So if that plays out, one would expect GSX Techedu's revenue growth to slow or for the company to increase its advertising budget. Neither is a great scenario for a growth company.

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Source Fool.com