Earnings preview: Mixed expectations in market ahead of Qudian’s Q1 report

When China-based financial technology firm Qudian Inc. (NYSE: QD) publishes its first-quarter results on Monday before the opening bell, the market will be looking for cues on improving its position in the stock market. To the relief of investors, analysts have predicted that earnings would more than double year-over-year to $0.34 per ADS this time. The forecast for the top line is $259.34 million, up 4.8%.

The company recently forecast that non-GAAP net income would cross the RMB3.5-billion mark in fiscal 2019, citing the expanding user base and stable demand. While the company claims it has a well-established funding base, the statistics paint a not-so-bright picture. The stock has been in a downward spiral for too long and the company’s cash credit and merchandise credit products are facing challenges.

Related: Sogou slips to loss in Q1; stock gains on revenue beat

The management has often stressed on scaling up stock repurchase to bridge the gap between the muted stock performance and what it calls “strong business fundamentals”. It continues to be one of the most undervalued Wall Street stocks, currently trading well below the long-term average. Nevertheless, considering the company’s solid balance sheet and positive outlook, the stock looks like an investment option worth considering.

The stock has been losing and the company’s cash credit and merchandise credit products are facing challenges

Qudian owes its initial success to the opening up of the online credit market in China, allowing companies to set up digital platforms for small consumer credit products. However, last year the sector came under stringent regulatory scrutiny, resulting in curbs on the companies.

In the fourth quarter, adjusted earnings climbed 48% annually to $0.37 per ADS on revenues of $262 million, which represents a 21% year-over-year increase. At the end of the quarter, the company had 71.8 million registered users, up 15% from the prior year.

Also see: Qudian Inc. Q4 2018 Earnings Conference Call Transcript

Earlier this year, a prominent securities brokerage in China reaffirmed its hold rating on Qudian, with a price target of $8, which indicates a 14% upside from the last closing price. The rating action echoes the recommendations of the majority of the analysts covering the company.

Qudian’s stock kept a low profile throughout last year, mostly trading flat. Though it gathered strength in the early months of 2019, the momentum was not sustained. After losing about 40% over the past twelve months, the shares traded below $7 on Friday – which is, however, up 56% from the levels seen at the beginning of the year.

Listen to publicly listed companies’ earnings conference calls along with the edited closed caption text