John Davis Recommends Buying Qudian Inc (QD) Shares At Current Levels
Stifel's John Davis believes Qudian's potentially growth opportunity outweighs the risks
Investors continued to dump Qudian Inc – ADR (NYSE:QD) shares today following the news that the Chinese authorities are suspending regulatory approval for the setting up of new internet micro-lenders.
However, Stifel Nicolaus analyst John Davis believes the market’s reaction will prove to be an opportunity, and as such reiterates a Buy rating on QD with a price target of $35, which implies an upside of 117% from current levels. (To watch Davis’ track record, click here)
Davis commented, “In our discussions with mgmt the regulation would only apply to new companies attempting to enter the small loan marketplace. Qudian, which is already licensed in China, would not be subject to the proposed regulation. If anything, the proposed regulation would create a significant barrier to entry for potential new entrants into the marketplace.”
“In addition, reports of a security breach appear to be an isolated incident. Although on the surface a potential breach raises questions about the company’s core fraud-detection capabilities, management stated that these systems are completely separate and it no way should raise questions about its impressive risk management capabilities,” Davis added.
Net net, the analyst believes Qudian offers a unique opportunity to invest in a profitable, sustainable multi-year growth story at a reasonable valuation. However Davis points out that an investment in Qudian isn’t for the faint of heart, as the typical lender risk of credit and funding are also accompanied by regulatory and key partner risk.
Qudian is a leading provider of online small consumer credit in China. The Company uses big data-enabled technologies, such as artificial intelligence and machine learning, to transform the consumer finance experience in China. With the mission to use technology to make personalized credit accessible, Qudian targets hundreds of millions of young, mobile-active consumers in China who need access to small credit for their discretionary spending, but are underserved by traditional financial institutions due to lack of traditional credit data.