Why LendingClub shares are crashing today
Digital Marketplace Bank Actions loan club (NYSE:LC) fell about 26.5% as of 11:41 a.m. ET today after the company announced its results for the fourth quarter and full year of 2021.
The company, which largely uses technology to create unsecured personal loans more efficiently, reported diluted earnings per share of $0.27 on total revenue of more than $262 million, beating industry estimates. analysts.
However, management’s forecast of $130-150 million in net profit implies lower earnings than analysts had expected for this year, which appears to be the main reason the stock is taking such a hit.
Further, the total loan origination forecast of $13 billion in 2022 does not imply such growth in origination relative to LendingClub’s rate over the past two quarters.
I’ve been a big fan of LendingClub stocks in the past, so I really see this as a market overreaction. When the company acquired Radius Bank last year, it allowed it to generate more revenue and profit from its existing business. The company can now generate much more earnings growth without having to rely so heavily on origination growth, not that origination growth isn’t important on its own.
Since acquiring Radius last year, management has also been fairly cautious about guidance, beating the top of its guidance in each of the past three quarters, despite the volatility in the economy. So I’m optimistic that it can beat earnings and origination forecasts this year.
Investors seem to want to treat LendingClub like a traditional bank, which I think is incorrect. Also, I would argue that even if you treat it like a traditional bank, a bank generating the kind of returns that LendingClub is shouldn’t be trading at less than 12x expected earnings this year.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.