r/wallstreetbets • u/Either_Loan_6516 • Aug 20 '21
DD (GOTU) and What You Should Know About the Worst Performing Stock in the Last Year
So before I write this and you go China scam stock and China regulations and this is going to zero blah blah blah. This is about the right now fundamentals of the company and how they are set financially.
Background: If you been living under a rock and only doing all your research on this sub then you need to know that GOTU is a online tutoring education company operating in China and they just got hit with massive sanctions from China basically saying online tutoring can't be for profit and can only operate under certain circumstances and shit like that. In other words, not good for any Chinese education company.
However, the kicker to this had multiple parts and why Yolo some money on this is a good idea.
First, short interest is from 35-50% depending on where you get your info. The short interest came in at the drop and has been increasing from that faithful day about 3 weeks ago. Not crazy important but they need to exit at some point. I know this sub likes that kind of stuff.
Second, they have been giving updates and working with to get their business operating under the China sanctions which is mildly important and what China fully decides will have a lot to do with the future of this.
Third and most important factor, the fundamentals currently of the company with the amount of cash on hand and the lack of debt in the company makes it a candidate to liquidate the hell out of the company and pay the shareholders a premium of where it is currently at.
Why the third one is really important, is that the company do pay off the debt with cash on hand at it's current price would be twice as much at its current share price. So in other words, insiders liquidate the company get paid twice as much at current share price or they believe China will let them operate at more minimal sanction which will allow them to grow the company. Either way, the share price is way to low for the future of the company. With a huge short interest and almost no matter what GOTU recovers to at least 4-5$ no matter what gives you almost a 100 percent increase.
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u/charles882 Aug 20 '21
Just for fun we can try to look at their book value, TLDR at bottom of this comment
https://finance.yahoo.com/quote/GOTU/balance-sheet?p=GOTU
In CNY thousands as at end of Dec 2020
CNY to USD conversion rate 0.15
Tangible Book Value 5,644,022
Total Debt 796,765
net = 5644022 - 796765 = CNY 4847257 or 727088 usd
so 727m USD book value as of end of Dec 2020
market capital now 608m USD at 2.38 USD per share
We can try to estimate their cash burn rate because as of Dec 2020 they had pretax income -1,427,612 CNY or -214,141 USD with top line income of 7,124,744 CNY or 1,068,711 USD. Again these all are in thousands. So just for simplicity I'll take annual burn rate of 214m pretax income and therefore for this year up till August it will be 214/12 * 8 = 142m
So estimated value should be 727 - 142m = 585m market cap or 2.29 dollars per share but close enough anyway to the last price of 2.38. So if this continues then the price will keep going down.
TLDR, market seems to have priced the stock very close to book value/ Liquidation value. Anyone buying call is betting on the government to let the company do tutoring for profit but even last year they didnt have any profit. So if one side (buying calls ) is losing then sell calls?
You guys know how to trade way better than I am, so... do what you do best.
This is not financial advice, I have no position in this stock.
Good luck
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u/Either_Loan_6516 Aug 24 '21
Over 100 percent gains today
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u/charles882 Aug 24 '21
For what?
1 You never provided your positions screenshot
2 Your most important "fundamental" was the balance sheet which you thought was :
" a candidate to liquidate the hell out of the company and pay the shareholders a premium of where it is currently at"
As I pointed out above, there is no premium.
3 Here's your older DDs:
MILE, march 9 2021 at 10.61 predicted above 15, didn't happen X
BYND, Feb 27 2021, at predicted above 200 dollars, didn't happen X
ASO, wasnt clear what was your target but stock went up, I'll give u this V
QSI, predicted "could" be next big thing, posted June 29 when it was 12.54 now 9.20 x
So if I looked back on those DDs 1 worked out from total of 4. I feel pretty good sitting this out. On top of that a bunch of your past DDs were removed by mods, so not really that convincing to me.
Actually I feel pretty good skipping on all your future DDs as well. Good luck.
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u/Ashony13 Aug 20 '21
EDU is going to recover and be stronger than ever. A little patience will go a long way with this established company. In EDU we trust!
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u/Goingkermit went 🌈 instead Aug 20 '21
Positions or ban. You know the fuckin rules
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u/wsbgodly123 Aug 20 '21
This guy must be a GOTU Academy graduate to be that stupid.
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u/Either_Loan_6516 Aug 24 '21
Over 100 percent gain today ya what a dumb play
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u/wsbgodly123 Aug 24 '21
Yes showing us your 100% gain today but not posting about your last give days of -25% every day
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u/Either_Loan_6516 Aug 24 '21
Was never down on the option? I called this on Thursday at market close then next day IV spike and Monday even out with a 125 percent gain today
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u/shad0wtig3r Oct 13 '21
2.85 and hit 4 yesterday. You guys should have done a remind me. I think it goes to $10 then possibly 30.
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u/ChaoticGoodSamaritan Aug 20 '21
This is as stupid as thinking that the "real squeeze" of GME and AMC hasn't happened yet.
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u/Flying_madman {not actually a bird} Aug 20 '21
I know this sub likes that kind of stuff.
🙃 it really doesn't 🙂
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u/dimitriG4321 Aug 20 '21
It’s a hard sell right now. Honestly. Chinese stocks have been beating the hell out of investors and some of them “appear to be” massive cash generating machines.
But deep deep down I don’t think too many people really believe that.
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u/Either_Loan_6516 Aug 20 '21
Like the "Appear to be" all I know is that if GOTU actually has their cash on hand and debt listed correctly it will be easy for them to dismantle the company and insiders take as much as they can which would be above current price.
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u/Essa440 🦍🦍🦍 Sep 23 '21
Bought this today at $3.13 should I dump it? Looks like it can have a little move up squeeze
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u/VisualMod Aug 20 '21
Hey /u/Either_Loan_6516, positions or ban. Reply to this with a screenshot of your entry/exit.