Qudian Stock crashed by 20% after the last earnings. While it was expected that Qudian revenues would go down because they are more choosy in giving their loans, it wasn't expected that the company would lose money. Qudian has been able to lower their delinquency rate but now they are losing money.
The reason for the loss is their latest business venture, Wanlimu Kids. With a resurgence of Covid-19 in China, many of the schools had to be closed but expenses such as teachers' salaries were still maintained. Wanlimu Kids is proving to be a bigger cash drain than anticipated.
Unfortunately, Qudian is not giving us enough information about Wanlimu Kids. We know they are losing a lot of money but we don't know how much exactly. There was only one page (With three lines) about Wanlimu Kids on the earnings presentation. Wanlimu Kids is not the first business venture of Qudian not working.
Qudian still has a very good balance sheet but unfortunately, the management is not making good use of it.
For the time being, I'm holding on Qudian because it is still massively undervalued. Let's see how things work out with Wanlimu Kids in the coming quarters. It is less than 2% of my portfolio.