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Yiren Digital stock has caught attention in recent weeks. Yiren Digital Ltd. is a leading fintech company in China, providing both credit and wealth management services. For its credit business, the Company provides an effective solution to address largely underserved investor and individual borrower demand in China through online and offline channels to efficiently match borrowers with investors and execute loan transactions, similar to Sentage Holdings that we wrote about recently. Sentage Holdings rose 50% from when we said it was oversold. I believe Yiren Digital is due for a bigger rise.

Financials

Yiren Digital recently reported their earnings for the quarter ended June 30, 2021. Number of borrowers served in the second quarter of 2021 was 434,153, a 4 times increase compared to 107,568 in the same quarter of 2020. Total net revenue in the second quarter of 2021 was RMB1,125M (US$174.2M), compared to RMB754.7M in the same period last year. This shows an increase of 49%.

Net income in the second quarter of 2021 was RMB200.1M (US$31.0M), as compared to a net loss of RMB232.2M in the same period last year. Cash and cash equivalents for the quarter ended as RMB2.1B ($339M). Total equity was $644M, with a current market cap of $300M.

Due for a reversal

Although Yiren Digital has progressed well in its financials, the stock price sits at a similar price to that of a year ago. In between this time, the share price has gone above $6.50 per share. Historically, the price had traded even higher than this, between $40-$50.The stock recently broke above the 20DEMA on strong volume. But, yesterday it rejected off the 50DMA. I believe it will break above and test the 200DMA, around $4 in the short term.

Evergrande playing its part

Evergrande has failed again to pay its debts, raising the concern across China. This will play into the hands of Yiren Digital. As more are left out of pocket, many will turn to loan companies to help finance their way. The immediate impact of Evergrande’s troubles will be on China’s once booming property market. The sector represents 7.3% of the countrys GDP compared to 4.1% in 2000. It is a market which been over-expanding for many years, with the debt level of other big development firms already very high. If Evergrande were to collapse, it would cause a domino effect across the sector, potentially leading to the demise of more businesses.

Also, the wealth management section will grow for Yiren as wealthy China investors may look to capitalise on the volatility in the China markets.

Analysts

Analysts have said earnings are due to grow over 50% year on year and the stock is trading at 87% below their estimates. We believe a big reversal is due for the company in the coming months.

One thought on “Yiren Digital stock looking to reverse”
  1. […] Yiren Digital (NYSE:YRD) has gained 15% at the time of writing on high volume (over 6 x the 50 day average). The chart has bounced off support around $3 and is now picking up momentum. The price tested $4 within the day after a low of $3.16 in the morning. If volume keeps up, the 50DMA at $4.17 would be our watch for a break to continue higher, towards $5. […]

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