What happened
Shares of the digital-marketplace bank LendingClub (LC -0.12%) had dropped roughly 26.5% as of 11:41 a.m. ET today after the company reported earnings results for the fourth quarter and full year of 2021.
So what
The company, which is largely in the business of using technology to more efficiently originate unsecured personal loans, reported diluted earnings per share of $0.27 on total revenue of more than $262 million, both of which beat analyst estimates.
However, management's guidance of $130 million to $150 million of net income implies smaller profits than analysts had been penciling in for this year, which appears to be the main reason the stock is getting hit so hard.
Additionally, total loan-origination guidance of $13 billion in 2022 doesn't imply that much origination growth from LendingClub's rate over the past two quarters.
Image source: Getty Images.
Now what
I've been a big proponent of LendingClub's stock in the past, so I definitely see this as an overreaction from the market. When the company acquired Radius Bank last year, that allowed it to drive more revenue and earnings from its existing business. The company can now drive much more earnings growth without having to rely on origination growth as much, not that origination growth isn't important per se.
Since acquiring Radius last year, management has also been quite conservative on guidance, beating the top range of its forecasts in each of the last three quarters, despite volatility in the economy. So I am optimistic it can beat earnings and origination guidance this year.
Investors seem to want to treat LendingClub like a traditional bank, which I would argue is incorrect. Furthermore, I would contend that even if you do treat it like a traditional bank, a bank generating the kind of returns that LendingClub is should not be trading at less than 12 times projected earnings this year.
