On Friday, Citi updated its assessment of LexinFintech Holdings (NASDAQ:LX), reducing the price target on the company's shares to $1.96 from the previous $2.03. Despite the change in price target, the firm retained a Neutral rating on the stock.
LexinFintech reported a decline in non-GAAP net profit after tax (NPAT) for the first quarter of 2024, with earnings falling 18.9% quarter-over-quarter and 38.6% year-over-year to RMB 230 million. This figure represents just 16% of the estimated net profit for the full year 2024, according to Bloomberg consensus estimates.
The company's loan volume for the first quarter showed a sequential decrease of 5.3% and a year-over-year decline of 4.8%, totaling RMB 58 billion. However, these numbers were in line with market expectations. Net revenue after provisions experienced a dip of 3.7% quarter-over-quarter and 7.5% year-over-year, amounting to RMB 1.47 billion for the quarter.
The decrease in net revenue was primarily attributed to heightened provision expenses, which were up 86.1% compared to the same period last year. Although there was a slight improvement with a 7.5% quarter-over-quarter decrease in provision expenses, this was not enough to offset the increased revenue take rate.
Citi's revised price target reflects the trimmed earnings and the current market conditions. The firm's stance remains cautiously neutral, emphasizing a high-risk rating for LexinFintech as it awaits clearer signs of an improvement in asset quality.
InvestingPro Insights
Amidst the market's cautious view of LexinFintech Holdings, a deep dive into the company's financial health and future prospects using InvestingPro's real-time data and analysis could provide investors with a clearer picture. LexinFintech stands out with a remarkably low Price / Earnings (P/E) ratio of 2.21 and an even lower adjusted P/E ratio of 1.65 for the last twelve months as of Q4 2023. This suggests that the company's shares are trading at a significant discount relative to its earnings, which could be a point of interest for value investors.
Furthermore, LexinFintech's Price / Book value is 0.22 for the same period, indicating that the market is pricing the company's assets at far below their balance sheet value. This, combined with a substantial revenue growth of 32.35% over the last twelve months as of Q4 2023, might signal an overlooked investment opportunity, especially considering the company's position as a prominent player in the Consumer Finance industry.
To complement these metrics, InvestingPro Tips reveal that LexinFintech has a perfect Piotroski Score of 9, demonstrating strong financial health, and cash flows that can sufficiently cover interest payments. Analysts predict the company will be profitable this year, as it has been over the last twelve months. For investors seeking more detailed insights, there are additional tips available on InvestingPro, and by using coupon code PRONEWS24, they can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
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