LC - LendingClub - An Explosive Move Higher Could Be Brewing

2024-05-10 13:58:12 ET

Summary

• LendingClub has seen 12 consecutive quarters of GAAP profitability during the most intense rate hiking cycle of the last decade.
• The company's tangible book value, in addition to the fair value of their loan portfolio, is almost $12 per share compared to the current stock price of just over $9.
• In a rate cutting environment, where LendingClub returns to historical origination levels of $3B per quarter, the company could generate almost $350M in incremental Pre-Tax income on an annual basis.
• The economy is weakening fast, with recent consumer companies reporting bad results, and the economic data is the only piece that remains for the Fed to acknowledge this and begin cutting rates. I believe this could become obvious as early as next week with the May CPI report.
• When the timing of rate cuts becomes more clear, LendingClub should see the business accelerate, but investors need to make their move before the stock re-rates significantly higher.

LendingClub ( LC ) recently saw a sharp rally after reporting better than expected Q1 2024 results. Shares of the stock were up almost 20% with the stock moving from $7.50 to about $9 per share. I am of the opinion that this is just the beginning of an even sharper move higher for shares of LendingClub. I have covered this company well on this site with previous articles , and have been ahead of some large moves in the past. Tangible book value for LendingClub sits at just over $10.60 per share according to the most recent earnings presentation provided . Further, the company notes that the fair value of their loan portfolio is about $1.30 higher than the carrying value. Another way to think about this is that, assuming these loans perform as expected, the value of the company is actually closer to $11.90 per share on a book value basis....

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