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Qfin Holdings (QFIN) Valuation After Hold Downgrade and Rising Regulatory, Credit Headwinds

Simply Wall St · 2d ago

Downgrade to Hold Shifts Focus to Near Term Risks

Qfin Holdings (QFIN) was recently downgraded to a Hold rating after Q3 results highlighted a weaker near term earnings outlook, even though the business is still viewed as strategically attractive over the long run.

The quarter showed that revenue is still moving in the right direction. However, higher credit provisions and operating costs squeezed margins enough to push earnings down roughly 17% year over year. This setback makes the next few quarters more about risk management than growth.

In addition, the operating backdrop is getting trickier, with regulators considering tighter interest rate caps and delinquency rates edging higher. Both factors could pressure Qfin’s credit tech model and keep investors cautious even after the recent share price pullback.

See our latest analysis for Qfin Holdings.

The downgrade comes after a tough stretch for sentiment, with the share price now at $19.57 and a 90 day share price return of roughly negative 32 percent. Even so, the five year total shareholder return of just over 100 percent still signals that the longer term story has been rewarding. This suggests that momentum has clearly faded in the near term, while the broader investment case remains intact.

If this kind of reset has you rethinking where to find more resilient growth, it could be a good moment to explore fast growing stocks with high insider ownership.

With the stock trading well below consensus targets, but sentiment under pressure from regulatory and credit risks, is Qfin now a mispriced cash generator, or is the market rightly discounting its future growth?

Most Popular Narrative: 44.9% Undervalued

With Qfin Holdings last closing at $19.57 against a narrative fair value of $35.55, the valuation story leans toward mispricing and potential future catch up.

The analysts have a consensus price target of $50.313 for Qfin Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $59.18, and the most bearish reporting a price target of $40.25.

Read the complete narrative.

Curious how modest revenue growth, easing margins, and a compressed future earnings multiple can still add up to a big upside gap? The narrative breaks down the earnings path, the shrinking share count, and the discount rate that together drive this higher fair value. Want to see which assumptions really carry the weight in that calculation?

Result: Fair Value of $35.55 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, upcoming APR cap decisions and further credit quality deterioration could quickly undercut the undervaluation case if margins compress more rapidly than anticipated.

Find out about the key risks to this Qfin Holdings narrative.

Build Your Own Qfin Holdings Narrative

If you see the story differently or want to dig into the numbers yourself, you can build a custom view in just a few minutes: Do it your way.

A great starting point for your Qfin Holdings research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.