What happened
Shares of online lender LendingClub (LC -0.12%) fell 15.1% in March, according to data from S&P Global Market Intelligence.
There wasn't any financial news coming out of LendingClub during March. In fact, on March 30, the company, founded in 2007, announced it had reached an impressive milestone of 4 million members.
So why did the stock fall? Well, LendingClub's CEO did say in an interview at the beginning of the month that the company was not interested in the cryptocurrency space, perhaps dampening enthusiasm from crypto-enthusiast growth investors. In addition, Federal Reserve Chairman Jerome Powell hinted at faster and steeper rate hikes this year, which has sparked fears of a recession, hitting all fintech stocks hard.
So what
During a March interview with Bloomberg, CEO Scott Sanborn was asked if LendingClub, like some of its fintech peers, would be getting into the cryptocurrency space.
Sanborn replied: "Look, the customer demand is there, but my view -- our view -- is if you've got $15,000 in credit card debt, the thing you should do with your next $500 is not buy a speculative asset. ... We recognize we could be leaving some consumer demand on the table."
This a prudent comment and what you want out of a responsible lender, but other fintechs such as SoFi Technologies are attempting to become an all-in-one financial ecosystem, complete with stock and crypto trading along with traditional banking. That can be a sexier story, and is why some other fintechs garner much higher valuations than LendingClub.
Financial stocks also struggled during the month as inflation numbers came in very hot, and the Federal Reserve began raising interest rates. With a rate hiking cycle, some anticipate the Fed may go so far as to spur a recession. In general, when recession fears begin to circulate, investors sell financials and newer fintechs, which are deemed risker than large banks.
Image source: Getty Images.
Now what
LendingClub has been absolutely decimated ever since inflation numbers became more persistent back in November. However, the company has been producing strong results, beating revenue and earnings expectations in the third and fourth quarters. While 2022 guidance came in perhaps lower than some expected, management is still projecting 40% revenue growth and 650% earnings growth at the midpoint. Meanwhile, the stock trades at just 11 times this year's earnings estimates, which seems far too cheap.
LendingClub is a different company since it purchased Radius Bank in 2021, gaining a banking license and low-cost deposits, and therefore becoming much more profitable than it had been previously. Management is now integrating the bank, and trying to combine the best attributes of a traditional bank with its tech-forward loan platform and customer acquisition engine. This hybrid neobank model, in which LendingClub can either sell or retain its loans, could make LendingClub a very interesting stock as the full effects of the Radius acquisition become apparent this year.
