Citi has updated its stance on LexinFintech Holdings (NASDAQ: LX), reducing the price target to $1.80 from the previous $1.96 while keeping a Neutral rating on the stock.
The firm's assessment followed the company's second-quarter financial report for 2024, which presented a mixed performance.
LexinFintech reported a non-GAAP net profit after tax (NPAT) of RMB 250 million for the second quarter of 2024, marking an 8.5% increase from the previous quarter but a 39% decline year-over-year.
This result contributed to a first-half NPAT of RMB 480 million, accounting for 38% of the full-year 2024 estimate consensus from Visible Alpha.
The company experienced a downturn in loan volume, witnessing a 12% quarter-over-quarter and a 20% year-over-year decrease, totaling RMB 51.1 billion for the second quarter. This figure fell short of management's guidance, which had been set between RMB 54 billion and RMB 55 billion.
Net revenue after provision in the second quarter showed a slight quarter-over-quarter increase of 2%, yet it reflected a 4.7% decrease when compared to the same period last year, amounting to RMB 1.5 billion. The increase in provision expenses, which rose by 12.6% from the previous quarter and by 88.8% from the previous year, was a significant factor in the mixed revenue results.
In addition to the financial results, LexinFintech declared a cash dividend of $0.072 per American Depositary Share (ADS) for the first half of 2024. This dividend is equivalent to 20% of the net profit for the period, with an ex-dividend date of September 16 and a payment date of October 18.
Citi has adjusted its earnings forecast for LexinFintech for the years 2024 to 2026, reducing estimates by 4% to 18%. The new price target reflects this revision. The firm maintains a Neutral/High Risk rating on the stock, indicating a cautious outlook as it awaits clearer evidence of an improvement in asset quality.
InvestingPro Insights
In light of the recent financial performance and market valuation of LexinFintech Holdings, several metrics from InvestingPro provide a deeper understanding of the company's current position. With a market capitalization of $291.01 million, LexinFintech trades at a low Price/Book multiple of 0.21 and an adjusted P/E ratio of 1.74 as of Q1 2024. These valuations suggest the stock may be undervalued relative to its book value and earnings, which could interest value-focused investors.
The company's revenue growth stands at 19.57% for the last twelve months as of Q1 2024, indicating a healthy top-line expansion. Additionally, LexinFintech's gross profit margin of 41.0% demonstrates a solid ability to retain earnings after the cost of goods sold. Despite a decrease in loan volume as reported, the company's profitability over the last twelve months and the ability to cover interest payments with its cash flows, as highlighted by two InvestingPro Tips, may provide some reassurance to investors concerned about its financial health.
While LexinFintech does not pay a dividend to shareholders, its significant price drop over the past five years might present a potential turnaround opportunity, especially as analysts predict the company will be profitable this year. For those considering an investment in LexinFintech, there are 9 additional InvestingPro Tips available that could further inform their decision. These tips can be found at https://www.investing.com/pro/LX, offering a comprehensive analysis of the company's financial health and market performance.
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