Total household debt in the United States is currently above $17.5 trillion—a record high—and has led to the average household spending over 10% of its monthly income on debt payments. Furthermore, there has been a noteworthy rise in average debt rates, corresponding to increased payment delinquencies. This has triggered a growing demand for credit card debt refinancing, which bodes well for LendingClub Corp (NYSE:LC), the leading online loan marketplace connecting borrowers to investors. As a result, the stock has rallied 27% in the past year, and recent Q1 results indicate further upside potential.
LendingClub is a prominent player in the online credit marketplace that provides a wide variety of loans, including personal, business, auto refinance, education, and patient solutions. Acting as the parent entity to LendingClub Bank, it has established itself as the leading digital marketplace connecting borrowers and lenders using advanced credit decisioning and machine-learning models which draw upon a substantial data pool generated from originating over $90 billion in loans since 2007.
LendingClub Sees Strong Loan Growth
LendingClub has seen strong loan growth and touts an expanding total addressable market of over $1.3 trillion, with credit card balances and average APRs reaching record highs. It reports that refinancing credit card debt has proven to significantly increase a borrower’s credit score and yield substantial savings, positioning it for further growth.
LendingClub’s Recent Financial Results & Outlook
The first quarter of 2024 saw the firm’s total assets reaching $9.2 billion, a considerable increase from the prior quarter’s $8.8 billion. Deposits saw a boost, increasing from $7.3 billion to $7.5 billion, courtesy of high-yield savings and certificates of deposit. A total of 87% of these deposits were FDIC-insured. The book value per common share increased to $11.40 from $11.34, while the tangible book value per common share increased to $10.61 from $10.54.
Financial results for the quarter surpassed expectations, with net income of $12.3 million, driving an EPS of $0.11, surpassing consensus estimate of $0.03. This performance was attributed to solid execution and delay in expected expense increases.
Anticipating an uptick in originations to a range of $1.6 billion to $1.8 billion, Q2 is expected to be positive despite the challenges caused by potentially higher interest rates.
What Is the Price Target for LC Stock?
Analysts following the company have been bullish on LC stock. For example, Seaport Research analyst Bill Ryan recently raised the price target for the stock to $10.75 from $7.75 while maintaining a Buy rating, citing greater stability in the company’s fundamental outlook and expectations.
Overall, LendingClub is rated a Strong Buy based on the recommendations and 12-month price targets assigned by six Wall Street analysts over the past three months. The average price target for LC stock is $10.95, which represents a 21.53% change from current levels.
LC stock has been trending upward, climbing over 73% in the past six months. It trades in the upper half of its 52-week price range of $4.73-$10.92 and shows positive price momentum, trading above the 20-day (8.16) and 50-day (8.20) moving averages. It appears to be relatively undervalued, with a P/BV of 0.79x, comparing favorably to the Credit Services industry average of 4.2x.
Final Thoughts: Undervalued with Positive Price Momentum
A rising debt burden is increasingly impacting more households, and LendingClub is well-positioned to facilitate loan originations to meet this growing demand. The stock is relatively undervalued and demonstrates positive price momentum, which are characteristics that investors looking for a solid option in the sector may find attractive.
