Why Qfin Stock Is Skyrocketing Today
Key Points
Qfin's sales in the first quarter came in lower than Wall Street's expectations, but investors saw signs of promise in the report.
Qfin has been taking a more cautious approach to its loan portfolio.
The company's guidance for the current quarter wasn't as bad as Wall Street anticipated.
Qfin (NASDAQ: QFIN) stock is seeing massive gains in Wednesday's daily trading session. The China-based fintech company's share price was up 25.1% as of 1:50 p.m. ET.
After yesterday's market close, Qfin published its first-quarter results -- and shares are rocketing higher despite some mixed data in the report. While the company's non-GAAP (adjusted) earnings per American depositary share were in line with expectations, sales for the period came in lower than anticipated.
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Qfin met earnings expectations despite lower than expected sales
In the first quarter, Qfin recorded earnings of $1.12 per American depositary share on sales of $566.74 million. The company's sales for the period came in roughly $22.8 million lower than anticipated, but that hasn't been enough to stop a dramatically bullish reappraisal for the stock. Sales were down roughly 16.6% year over year last quarter, but the company's guidance has investors betting that performance could be starting to stabilize.
What's next for Qfin?
Even though Qfin's sales saw a double-digit drop last quarter, the decline occurred as the company began adopting a more cautious approach to issuing credit. The company's asset quality improved in the quarter, with its delinquency rate in the quarter coming in at 3.5% -- and management's forward guidance has investors feeling more optimistic about the business's outlook.
For the current quarter, Qfin is guiding for net income between 830 million Chinese renminbi and 910 million renminbi. While that suggests another big decline for overall net income, it also leaves the door open for a sequential quarterly improvement over the 879.8 million renminbi in net profit recorded last quarter. Even though the company's sales and earnings are taking a hit, investors seem to be happy with the company's pivot to a more risk-averse financial portfolio.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.