Analysts Are More Bearish On Qudian Inc. (NYSE:QD) Than They Used To Be

Today is shaping up negative for Qudian Inc. (NYSE:QD) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the downgrade, the consensus from three analysts covering Qudian is for revenues of CN¥2.3b in 2021, implying a painful 37% decline in sales compared to the last 12 months. Statutory earnings per share are presumed to bounce 49% to CN¥5.65. Prior to this update, the analysts had been forecasting revenues of CN¥3.3b and earnings per share (EPS) of CN¥3.84 in 2021. Thus, there's been a definite swing in sentiment, with the analysts making a considerable reduction to this year's revenue estimates, while at the same time substantially upgrading EPS. It's almost as though the business is forecast to reduce its focus on growth to enhance profitability.

See our latest analysis for Qudian

The consensus price target rose 5.9% to US$1.50, with the analysts signalling that the improved earnings outlook is the key driver of value for shareholders - enough to offset the reduction in revenue estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Qudian, with the most bullish analyst valuing it at US$1.90 and the most bearish at US$1.20 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 37% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 26% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 14% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Qudian is expected to lag the wider industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Qudian's revenues are expected to grow slower than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Qudian going out to 2022, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

If you decide to trade Qudian, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.