What happened

Things are really not going well for Chinese online small consumer credit provider Qudian Inc. (NYSE:QD) Last week, Qudian reported its financial results for fiscal Q3 2017 -- and the stock has been in a tailspin ever since.

Entering earnings at a share price of $27.23, Qudian shares have lost 33% of their value in the last six trading days. The shares fell as much as 20% more in early Tuesday trading, and after recovering somewhat, were recently spotted hovering around $18.40 per share as of 12:35 p.m. EST -- down about 8.2% for the day.

Scattered pieces of Chinese currency

Image source: Getty Images.

So what

What's all the fuss about? Last week, Qudian reported that its total revenue for fiscal Q3 topped $218 million, and was up 308% from Q3 2016. Net income increased even faster, up 322% year over year at $97.8 million. Qudian's revenue number was just short of analysts' $218.8 million revenue forecast, while the company's per-share profits -- $0.33 per share -- exceeded Wall Street's expected $0.30 per share.

Given that Qudian "beat" on earnings, and only barely missed in revenues, one is tempted to ascribe the sell-off to investors overreacting to what was a very minor miss. This morning, however, Reuters reported that China is "clamping down" on online micro-lending and urging provincial governments "to suspend regulatory approval for the setting up of new internet micro-lenders."

Now what

That certainly sounds like bad news for Qudian, but here's the thing: Qudian is already "set up." Its business is established, growing, and profitable. What's more, tightened regulation of new competitors sounds to me like something that would have the primary effect of limiting new competition coming on board to challenge Qudian's leadership, not something that would slow Qudian down.

Seeing the decline in Qudian's stock price slow, reverse, and now turn into a climb back toward where the stock began today, I wonder if other investors are starting to come to the same conclusion.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.