Lexinfintech (LX) Report
Here is the report I prepared on LexinFintech. This report will help you understand why I placed LexinFintech in my 5 Star Trading Portfolio.
LexinFintech Holdings (LX)
I bought LexinFintech Holdings Ltd.(LX) on 11/25/19 at $11.89 per shares. Read here.
Before we get into LexinFintech (LX), let’s first define Fintech, and what a Fintech company does.
Wikipedia – Financial technology, often shortened to fintech, is the technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. It is an emerging industry that uses technology to improve activities in finance. The use of smartphones for mobile banking, investing services, and cryptocurrency are examples of technologies aiming to make financial services more accessible to the general public. Financial technology companies consist of both startups and established financial institutions and technology companies trying to replace or enhance the usage of financial services provided by existing financial companies.
Fintech is innovative, it’s disruptive, it’s in it’s infancy and it’s here to stay. The fast and innovative progresses such as Mobile Payments changed the way we manage our finances. Tech-savvy customers, especially millenials expect money transfer, lending, loan management and investing to be effortless, secure and scalable, ideally without the assistance of a person or the visit of a bank. The world is changing!
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The impact that fintech is making throughout our economy is still in its infancy stages. Fintech is really just about innovating and bringing solutions to the banking, lending and capital markets. – Jason Raznick
From payments to wealth management, from peer to peer lending to crowdfunding, a new generation of startups is taking aim at the heart of the industry … . Like other disrupters from Silicon Valley, “fintech” firms are growing fast. – The Economist
Traditional banks are eager to court fintechs as clients, partners or vendors – often in all three roles at once. – Mark Calvey
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Below is a business summery of LexinFintech taken from the LX’s page of my brokerage account. LexinFintech a young Chinese financial technology (fintech) firm with millions of customers. And that number is growing 56% year over year.
LexinFintech Holdings Ltd. is a holding company. The Company is primarily engaged in providing online direct sales services and online consumer finance services. The Company’s online consumer finance platform, Fenqile, offers customers personal installment loans, installment purchase loans and other loan products. Through its online investment platform, Juzi Licai, the Company matches funding from individual investors with customer loans. The Company also offers Le Card credit line to its customers. The Company serves the credit needs of the customers aged between 18 and 36 in China.
The company owns and operates Fenqile, a popular online shopping mall that also offers installment loans. In addition, it matches borrowers with other lenders, including commercial banks and consumer finance companies.
One of LexinFintech’s main services is Juzi Licai. It’s an online loan platform that allows access to credit without going through a bank. It matches customer loans with diversified funding sources, including individual investors, third-party commercial banks, consumer finance companies and other licensed financial institutions.
LexinFintech has partnered with more than 100 financial institutions. They include the likes of the Industrial and Commercial Bank of China, People’s Insurance Company of China Group, and China Minshen
China has one of the fastest-growing middle classes in the world, with about 430 million people currently. That alone is larger than the entire population of the United States. China, and every other country in the world, are learning a lot about the way of life here in the United States. And everyone wants a piece of it
In China these increasingly affluent young consumers want all the things we take for granted here in America: TVs, computers, smartphones, cameras, major appliances, beauty products, upscale clothing, etc. And they have adopted another idea from the free world, buy now – pay later! And that’s playing right into the hands of LexinFintech (LX).
China’s growing middle class is young and urban. It’s tech savvy and credit starved. LexinFintech is the leader of a new online loan industry that has emerged around its needs, as well as the needs of small business owners and rural communities. LexinFintech is China’s premier online consumer finance firm.
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The fintech industry that LexinFintech exemplifies could become a $100 trillion market. – PayPal CEO Dan Schulman
LexinFintech’s Growth and Financials
China isn’t just the world’s most populous country. It is also the world’s fastest-growing consumer market. Tens of millions join its middle class each year.
More than 90% of LexinFintech’s customers are young, educated, and between the ages of 18 and 36. This is a demographic group that has been underserved by China’s traditional banking system.
At the end of 2016, the company had just 12 million registered users. But in early 2019, it reported 42.2 million users! That’s a 250% increase in less than 2 1/2 years. And it’s positioned to keep growing for years to come.
In Q4 2018, Juzi Licai drew 66% of its funding from its institutional partners. It’s getting the best of both worlds, new peer-to-peer (P2P) lending and established traditional lending.
There are huge numbers of small and medium sized businesses hungry for credit that LexinFintech is now well positioned to provide.
The company has been publicly traded only since late 2017. Since then, it has seen a huge, fast rise. LexinFintech first turned a profit in 2016 when it brought in $653.4 million in revenue and $90.7 million in profit.
In 2017, its revenue climbed by almost $200 million to $827 million. Its profits more than doubled to $195.6 million.
Last year, it broke the $1 billion mark. It brought in $1.149 billion in revenue, and its profits more than doubled again to $455 million.
It’s also worth noting that it’s beaten consensus earnings per share estimates for the last four quarters.
With a market cap of $1.79 billion, LexinFintech has staying power and plenty of room to grow.
In fact, analysts at Bloomberg expect LexinFintech to earn $1.82 a share in fiscal 2019. If it meets that goal, it will be an 84% increase over 2018. That means it is trading at less than 5.49 times prospective earnings.
If you look at my Wealth Builder stock buying criteria, here, you will see LexinFintech fits into most of the criteria on my list.
The company is still small and almost completely unknown on Wall Street. Its market cap is less than $1.8 billion.
It is a tremendous innovator, offering online shopping, with installment financing, to China’s young and increasingly affluent consumers.
Revenue is up 36%. Customer growth is up 56%.
The company enjoys a 42.2% profit margin protected by a wide array of brand names and patents.
Insiders own 22% of the outstanding shares. That means they have plenty of skin in the game.
When I Googled “hedge funds holding LexinFintech,” one of the first articale was titles, Hedge Funds Have Never Been More Bullish On LexinFintech Holdings Ltd. (LX). LexinFintech is held by more than 100 hedge funds, among them are: Goldman Sachs, Credit Suisse, Renaissance Technologies, Vanguard Group, Bank of America, Merian Global Investors, Morgan Stanley, State Street Corp, Barclays, U.S. Bankcorp, Raymond James, Bank of Montreal, Citigroup, Blackrock, the list goes on and on.
I bought the stock at $11.89 a share. As I prepare this report the stock is trading at $15. If you read the email when I bought the stock, read here, I was very high on the stock then. And I still am. I feel this stock has a long runway of growth ahead of it. When I bought the stock I put on a 20% Trailing Stop Loss. Because it’s up more than 10% from purchase I changed to a 25% Trail Stop.
All of the facts and stats of this report were taken from various articles and websites while I was doing my investigation.