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Why LexinFintech Holdings Is Tumbling Today

By Eric Volkman – Aug 25, 2021 at 4:01PM

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Chinese finance sector stocks aren't exactly hot right now, and the company's reduced guidance doesn't help.

What happened

China-based LexinFintech Holdings (LX 2.37%) saw its share price drop at double-digit rates on Wednesday following the release of its latest quarterly results. In mid-afternoon trading, the previously popular stock was down by nearly 13%.

So what

For its second quarter, LexinFintech earned revenue of just under 3.27 billion yuan ($505 million), which bettered the almost 2.96 billion yuan ($457 million) it made in the same quarter last year. That derived from total loan originations of 60.6 billion yuan ($9.4 billion) in the quarter, against the 41.1 billion ($6.3 billion) of Q2 2020.

Chinese 100 yuan bills.

Image source: Getty Images.

Net income rose to slightly under 787 million yuan ($121 million), or the equivalent of $0.30 per diluted share, from the year-ago result of 419 million yuan ($65 million).

Average analyst estimates for revenue and profitability weren't immediately available.

Despite those encouraging growth rates, LexinFintech quoted its CEO Jay Wenjie Xiao as saying: " ... it's no time to stay content and complacent. Recent regulatory changes have sought to reshape the operating environment of financial institutions and their technology partners." 

Now what

Nearly every Chinese finance sector operator of significant size is being cautious, given their government's recent crackdowns on their industry in particular, and on publicly traded companies more generally.

So LexinFintech has trimmed its guidance. It now believes total loan originations for this year will be roughly 230 billion yuan ($35 billion); formerly it estimated 240 billion yuan ($37 billion) to 250 billion yuan ($39 billion). No revenue or profitability forecasts were provided.

Regardless, that 230 billion yuan would represent an improvement of nearly 30% from the 2020 tally.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Lexinfintech Holdings Ltd. Stock Quote
Lexinfintech Holdings Ltd.
$1.73 (2.37%) $0.04

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