On Thursday, BofA Securities updated its outlook on Qifu Technology (NASDAQ: QFIN) shares, increasing the price target to $28.40 from the previous $25.00. The firm maintained its Buy rating on the stock.
The adjustment follows a notable rise in Qifu's net take rate of its loan portfolio, which increased from approximately 3.5% in the first quarter to roughly 4.4% in the second quarter.
This improvement is attributed to a growing proportion of capital-light loans that recognize revenue more swiftly than capital-heavy loans, a decrease in funding costs, reduced provisions due to fewer capital-heavy loans, enhanced cost efficiency amid economic uncertainties, and optimized operations that have allowed the company to better serve existing clients and reach new ones.
These positive developments have carried into the third quarter, with expectations for the net take rate to potentially exceed 5%, according to Qifu's guidance of RMB1.55-1.65 billion in third-quarter non-GAAP net profit.
Despite this uptick, the company's management has indicated that the current net take rate may not be sustainable, considering 4.0-4.5% as a more reasonable range for the future.
In light of these factors, BofA Securities has revised its earnings per share (EPS) forecasts for Qifu Technology. The firm has increased its EPS estimates more significantly for 2024, with a 22% rise, while the projections for 2025 and 2026 have seen a more modest increase of 15% and 3%, respectively. This revision reflects the firm's analysis of Qifu's financial performance and the expected trajectory of its earnings in the coming years.
Investors and market watchers will monitor Qifu Technology's performance in the upcoming quarters to see if the company can sustain its improved net take rate and continue to capitalize on its strategic operational adjustments.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.