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  • Writer's pictureIshfaaq Peerally

QUDIAN STOCK ANALYSIS - Chinese Fintech Company

The markets $SPX500 still at ATH today. In our portfolio, GameStop $GME is up by 3% same for our $OIL stocks, Concho Resources and Parsley Energy as oil prices gain over 2%. I took some profits from these two companies as I wanted to limit my exposure to commodities to less than 10% and added a small position in $TLT . I wrote an article on why a short squeeze can happen to GameStop. I'll put the link below.

QUDIAN STOCK ANALYSIS - Chinese Fintech Company

Qudian $QD a Chinese fintech company which does P2P (peer to peer) lending. Qudian has taken advantage of the rise of microcredit and technology in China by creating a platform that allows people to loan money to each other over a short-period of time. These people would normally not qualify for a bank loan. China currently has the highest unbanked adult population in the world. There are more people in China with a mobile phone than with a bank account. But all these people need financial services and Qudian was able to take advantage of that demand.

Qudian doesn't give loans to everyone using their platform and that's because giving loans to people who may default is risky. Qudian, therefore, partnered with other financial institutions to sell part of these subprime loans to them. This is called the Qudian open platform. On the open platform, the margins of Qudian are lower but they can have more customers.

Qudian has been existence only for five years and they are already profitable and their revenues and profits are growing at a fast rate. In the future, however, their margins would go down because of the open platform and also because of regulation and competition, they would not be able to charge 36% interest on a loan. This is one of the problems that Wall Street sees with this company.

The other problem is that the company is changing too much. Last year Qudian tried selling cars through Dabai Auto. It didn't really work and they abandoned the idea. Qudian has been trying many things over the years and not all of them worked. It is good that they are trying new things as one of these may actually be good for the business for the long-term, for example, the open platform.

There are other reasons why Qudian stock has been falling in recent years, the trade war, slowdown in the Chinese economy and most recently the coronavirus outbreak.

Last month, Qudian announced that they were going to buy back $550 million worth of shares.

Is Qudian a good investment? It is risky because the way the business is changing but at such a price it is worth the risk. Qudian could be a tenbagger or even a twentybagger. Just compared to the average Chinese company, with a PE ratio of 10.9, Qudian stock price will need to grow by 7 times to be average.

I'm going to take this opportunity to invest in Qudian but I'm not going to make the same mistake I made with GameStop $GME by investing too much too fast. I want to invest not more than 4% of my portfolio in Qudian and I'm going to do that over the next 6 months. But Qudian is not the only one chinese company I want in my portfolio. I'm still looking for other companies, maybe more mature and with more stable returns.

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You can find my full analysis of Qudian here:

GameStop article (free):

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