LendingClub Stock Up 32% Today – Time to Buy LC Stock?

The price of LendingClub stock is surging over 32% in pre-market stock trading action this morning following the release of the firm’s earnings report covering the third quarter of 2021 as the company surprisingly posted its second consecutive quarter of net earnings while it also raised its Q4 guidance above analysts’ forecasts.

For the three months ended on 30 September, the company reported revenues of $246.2 million resulting in a 246% jump compared to the same period a year ago and a 20% increase compared to the previous quarter. The figure also exceeded Wall Street’s consensus estimate by more than 11%.

An increase in the firm’s net interest margin was primarily responsible for this uptick in LC’s top-line results as the percentage ended the third quarter of 2021 at 6.3% resulting in a 340 basis points improvement compared to Q3 2020. Meanwhile, loan originations increased 14% compared to the previous quarter.

Unsecured personal loans fueled higher loan originations for the period as the firm reported a total of $1.26 billion in these financing instruments resulting in a 62.3% quarter-on-quarter jump.

Meanwhile, earnings per share for LendingClub landed at $0.26 on a fully diluted basis compared to the negative $0.38 figure it reported back in Q3 2020. This figure exceeded analysts’ consensus estimate by nearly 26 cents or 192%.

For the upcoming fourth quarter, LendingClub is expecting to report earnings between $240 and $250 million – nearly $30 million more than what Wall Street was expecting – while its net earnings per share are expected to be quite similar to this quarter’s figure based on the management’s forecast of $25 million for the firm’s consolidated net income.

This would also be a sizable improvement in the firm’s bottom-line profitability and it is taking analysts by surprise as the consensus estimate for the firm’s EPS for Q4 2021 was standing at $0.16 per share.

Can this upbeat earnings report lead to an acceleration in the uptrend that the stock was already experiencing? In this article, I’ll attempt to answer this question by assessing the latest price action and financial data for LendingClub stock.

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LendingClub Stock – Technical Analysis

The price of LendingClub stock has been on an uptrend since the firm reported its financial results for the second quarter of 2021 as the company unexpectedly swung to profitability.

Meanwhile, revenues also exceeded Wall Street’s estimates by a long shot by then and the same goes for the management’s guidance.

These surprising Q3 earnings and the firm’s forecasted Q4 earnings are both favoring the view that the company has solidified its profit-generation capacity and this is possibly the reason why the market is reacting so positively to the news.

If today’s pre-market uptick spills over to the live session as-is, the price would break above the rising wedge formation shown in the chart above and the price action will probably leave behind a sizable bullish price gap as a result.

Moreover, in a single day, the price would push through the 1.618 Fibonacci extension and could possibly aim for the 2.618 extension shortly afterwards if fundamentals still leave room for the rally to continue.

Lending Club Stock – Fundamental Analysis

LendingClub had been reporting higher top-line results in the four years that preceded the pandemic as demand for peer-to-peer loans increased progressively during that period.

However, the health emergency negatively impacted the company’s revenue-generation capacity as Americans saved more money than usual and took fewer loans while they remained confined within their homes.

Now, it seems that the demand for the unsecured loans and other financing facilities offered within the company’s P2P platform has increased and that is leading LC to report record revenues for the full 2021 fiscal year.

According to the management’s guidance, revenues should land in a range between $796 and $806 million by the end of the year compared to $320 million the firm brought a year ago while net consolidated income may end the year at approximately $14 million resulting in a significant improvement compared to the $187.5 million the company lost a year ago.

Meanwhile, moving forward, if the firm manages to keep producing similar quarterly results in the future, it would be plausible to expect earnings per share of at least $1 for the next fiscal year if the current tailwind keeps lifting LendingClub’s results.

In that scenario, the firm would be currently valued at 41 times its forecasted earnings per share based on today’s pre-market price of $41 per share.

This valuation seems quite conservative for a firm with promising growth prospects in an increasingly digital environment prompted by the pandemic. Therefore, the outlook from both a fundamental and technical perspective for LC stock is bullish.

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