LendingClub Corporation (NYSE:LC) surpassed revenue and earnings expectations for the fourth quarter, but the stock price declined sharply as investors reacted to a lower first-quarter earnings forecast. The company earned $29.1million in the fourth quarter of 2021.
The stock price of San Francisco, California-based lending company has been under pressure since it hit a 52-weeks high of $49 a share in the December quarter of 2021.
Long term fundamentals are strong despite lower Q1 earnings
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LendingClub lost almost half of its stock price in the last three months as investors are showing concerns over the drop in earnings. The broader market selloff has also contributed to its share price decline in the past two weeks.
The company’s net income for the first quarter is likely to be negatively impacted by one-time credit losses. Besides the first-quarter earnings forecast, the company expects to generate robust revenue and earnings growth for the full fiscal 2022.
Scott Sanborn, the company’s CEO, predicts an incremental earnings boost of $100 million in 2022 as a result of the transformed business model and membership benefits.
The lending company anticipates fiscal 2022 revenue in the range of $1.1-$1.2 billion compared to analysts’ consensus of $1.14 billion. Consolidated net income is likely to hit $130-$150 million from $18.6 million in the past year.
LendingClub stock fell into a buying zone and its valuations turned attractive after the recent price collapse, according to market analysts.
Seaport Research analyst Bill Ryan provided a $35 price target to LendingClub stock with a buy rating. The analysts also praised its acquisition of Radius Bank. The acquisition will eliminate origination fees, decline the cost of funding sources, and stabilize the interest income.
We see significant growth opportunity as the company reopens its installment lending channels and builds off a very small portfolio base, which will be complemented through growth in new areas like auto finance and planned larger ticket purchases such as elective medical proceduresthe.
Buy the dip
LendingClub’s shares plunged sharply on short-term factors like quarterly earnings forecast. The dip has presented an attractive entry point for new investors. It also looks like a good stock to buy based on moving averages. The relative strength index also indicates that the stock is entering into an oversold condition and is set to bounce back.
Final thoughts
LendingClub is among the fast-growing lending companies. Its aggressive growth strategies, new product launches along with recent acquisitions will help in generating sustainable financial growth in the long term.
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