Analyst Sees 55% Upside In Qudian Shares

After Stifel analyst John Davis initiated coverage of Qudian Inc – ADR (NYSE: QD) with a Buy rating Wednesday, the Chinese microlender managed to secure the approval of more Wall Street firms.

The Analyst 

Citigroup analyst Daphne Poon initiated coverage of Qudian at Buy, with a DCF-based target price of $38.79, suggesting 55 percent upside from Wednesday's close.

The Thesis

The partnership with Alibaba Group Holding Ltd (NYSE: BABA)'s Ant Financial would enable strong borrower engagement and effective risk management, Poon said in a note.

Qudian has extensive access to first-time borrowers via unique access to Alibaba's Alipay interface, Poon said. Qudian's ability to link borrower repayment records to Zhima Credit Score gives the company risk management capability that outshines its peers, the analyst said. 

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"In return, Qudian helps Ant to enhance its credit model, better tap into student user base and boost transaction volume/gross merchandise value," Poon said.

Among the positives are the company's affordable credit offering on back of superior cost efficiency; the value added by offering merchandise credit; and Qudian  being less vulnerable to regulatory tightening, the analyst said. 

The Price Action

Qudian, which debuted on Wall Street Oct. 18, has traded in the $21.92-$35.45 range.

At the time of writing, shares of Qudian were rallying 2 percent to $25.49.

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