Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of LendingClub Skyrocketed This Week

By Bram Berkowitz – Oct 28, 2021 at 4:42PM

Key Points

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company reported earnings results for the third quarter of the year.

What happened

Shares of the digital marketplace bank LendingClub (LC 6.87%) shot up as much as 30% this week after another terrific quarter of earnings results.

So what

In the third quarter, LendingClub reported diluted earnings per share of $0.27 on total revenue of more than $246 million, both numbers that beat analyst estimates. The company also did more than $3.1 billion of loan originations, the main driver of revenue. Profitability, revenue, and loan origination volume also exceeded management's previous guidance for the quarter. 

The quarter was particularly impressive because the surge of the delta variant in the period definitely slowed the economic recovery slightly. Additionally, while LendingClub's bread and butter is typically originating unsecured personal loans for consolidating credit card debt and making larger purchases, the fintech company also grew auto refinance originations 85% from the sequential quarter. The auto refinance market could be another huge opportunity.

Management also revised its full-year guidance higher. LendingClub now expects full-year originations to range from $10.1 billion to $10.3 billion, total revenue to come in between $796 million and $806 million, and total profitability to come in between $17 million and $22 million.

Person running across large arrows pointing right and up in ascending order left to right.

Image source: Getty Images.

Now what

Ever since LendingClub acquired a bank charter earlier this year and changed its model to holding more loans on its balance sheet, which generate monthly recurring interest income, the stock has been ripping.

But even after rising more than 347% year to date, LendingClub's market cap sits at a little more than $4 billion. Other competitors in the space trade at much higher premiums, but are generating similar revenue and profitability. LendingClub still only trades around 3.6 times forward revenue. I remain incredibly bullish.

Bram Berkowitz owns shares of LendingClub and has the following options: long January 2023 $45 calls on LendingClub. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.