LendingClub stock price recovered strongly after bottoming at $4.90 in 2023 as concerns about its viability continued. LC has soared to $17.50, its highest level since February 2022, bringing its market cap to over $1.97 billion. So, let us explore why the stock is rising, and why technicals point to a 53% increase.
LendingClub’s business is doing well
LendingClub is a leading American company in the personal loans industry. This is a vibrant industry, with a large total addressable market since many Americans use loans to fund their day-to-day operations.
LendingClub’s business has gone through boom and busts in the last few years. Its revenue moved from over $1 billion in 2019 and fell to $468 million in 2020 as the pandemic hit. It has now rallied to over $1.1 billion.
The company’s value proposition is that its debt consolidation services help to save Americans substantial costs. Data shows that about 47% of all Americans have over $1.3 trillion in debt, with the average credit card rate soaring to 22%.
Just last week, we reported that default rates on personal loans are surging. More data shows that delinquencies in auto loans has also jumped in the past few months as the Federal Reserve maintained higher rates and the jobless rate rose.
Economists agree that, while the headline economic numbers are strong, the lower side of the wealth bracket is not doing well. That partially explains why most of these people voted for Donald Trump in the last general election.
LendingClub’s value proposition is that members save about 30% when they use its service to consolidate their credit card. Also, members who consolidate their debt significantly improve credit scores.
The most recent results revealed that LendingClub’s revenue rose to $201 million in the third quarter, higher than analysts expected. The revenue figure was higher than the $187 million it made in the second quarter, and the $200 million it generated in Q3’23.
LendingClub’s revenue happened as its total originations rose to $1.9 billion, in the upper side of its guidance.
LendingClub has seen higher provisions for credit losses with personal loan defaults rising. Its provision for these losses rose from $35.6 million in Q2 to $47.5 million in Q3.
Outlook for LC shares
Analysts expect LendingClub’s business will continue doing well as the management continues the turnaround efforts.
The average revenue estimate among Wall Street analysts is that its 2024 revenue will be $775 million.
LendingClub will resume its growth in 2025, when its revenue will surge by 20% to $932 million. The company will also become more profitable, with its estimated earnings per share growing from 46 cents in 2024 to 83 cents in 2025.
Analysts have a mixed outlook for the LendingClub stock price. Those at JPMorgan recently downgraded it from overbought to neutral, citing the disruption by many fintech companies. This was a notable downgrade since JPM upgraded it in 2023.
Piper Sandler and KBW analysts maintained their overweight rating. The average LC stock forecast is $18.6, slightly higher than the current $17.5.
LendingClub stock price analysis
The weekly chart shows that the LC share price has recovered after bottoming at $4.90 in 2023. It formed an inverse head and shoulders chart pattern, a popular bullish sign.
The stock has moved above the 21.6% Fibonacci Retracement level. And most importantly, it is about to form a golden cross as the spread between the 200-week and 50-week moving averages narrow.
The Relative Strength Index (RSI) and the MACD indicators have pointed upwards. Therefore, the path of the least resistance for the LendingClub stock price is bullish, with the next point to watch being the 50% retracement point at $27.3, which is about 53% above the current level.
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