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Time to Buy These 2 Financial Lending Stocks?

The consumer lending space had been very intriguing in recent years with LendingTree TREE reaching an all-time high in July 2019. Newer companies like LendingClub LC were hoping to follow LendingTree’s momentum.

However, fast forward to 2023 and many of these equities have fallen sharply and given back tons of their gains.

But there could be huge upside potential for LendingTree and LendingClub and it may be time to look at these stocks while they are near multi-year lows.

Lending Overview

LendingTree (TREE) and LendingClub (LC) both offer financial service platforms to the consumer lending space.

To that note, LendingTree was founded in 1996 and offers its online marketplace to connect customers to over 500 lending partners. LendingTree’s Home segment provides loan offerings that include purchase mortgages, refinance mortgages, home equity loans, lines of credit, and reverse mortgage loans in the U.S.

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Zacks Investment Research


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LendingTree’s Consumer segment includes information, tools, and access to multiple conditional loan offers for credit cards, personal loans, small business loans, student loans, auto loans, and deposit accounts among other credit products. Finally, the Insurance segment offers information, tools, and access to insurance products and policies with the company also having a small footprint in the resale of online advertising to third parties and home improvement referrals.

As for LendingClub, the company is a bit newer to the consumer lending space after its incorporation in 2006. For now, the company offers an online marketplace for loan approval, pricing, servicing, and support operations along with a regulatory and legal framework that connects borrowers with investors.

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Zacks Investment Research


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Lending Growth

LendingClub is starting to stand out in terms of growth, with earnings forecasted to be up 661% in its current fiscal 2022 to $1.37 per share compared to $0.18 a share in FY21. Fiscal 2023 earnings are expected to rise another 1% with estimates starting to trend higher again.

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Zacks Investment Research


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LendingClub’s sales are expected to jump 44% for fiscal 2022 and rise another 1% in FY23 at $1.20 billion. Even better, FY23 would have the company 9% above pre-pandemic sales of $1.1 billion in 2019.

Looking at LendingTree, earnings are now expected to decline -76% in its current fiscal 2022 to $0.38 per share compared to EPS of $1.57 a share in 2021. However, FY23 earnings are anticipated to stabilize and rebound 210% to $1.17 per share. Earnings estimate revisions have trended higher for FY22 but declined for FY23 over the last 90 days.

On the top line, sales are projected to dip -10% for FY22 and decline another -3% in FY23 at $954.10 million. FY23 would also be a -13% decrease from pre-pandemic levels with 2019 sales at $1.1 billion.

Performance

With the bottom line growth picture expected to stabilize for both LendingClub and LendingTree, last year’s selloff has these stocks appearing to be on the edge of oversold territory.

LendingClub stock is down -64% over the last year Vs. LendingTree’s -80%, with both drastically underperforming the S&P 500’s -19%.

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Zacks Investment Research


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This is despite having nice peaks during this period, with LendingTree trading at over $400 a share as previously mentioned, and LendingClub at almost $50 a share. Both stocks are now under $30 a share with LendingTree trading at $27 a share and LendingClub shares at around $8.

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Zacks Investment Research


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Valuation

Valuation can support the idea that these stocks are oversold and this appears to particularly be the case for LendingClub with the stock trading at just 6.2X forward earnings. This is nicely below the Financial-Miscellaneous industry average of 9.1X and 93% below its five-year high of 96.7X.

In comparison, LendingTree trades at 20.9X forward earnings which is above the Financial-Mortgage & Related Services industry average of 7.9X. However, LendingTree does trade well below its extreme five-year-long high of 10,815X.

As investors have certainly paid a premium for these popular lending stocks in the recent past gauging their price to sales is ideal as well. From this perspective, we can also see that LendingClub and LendingTree stocks are trading far more reasonable as well.

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Zacks Investment Research


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LendingClub’s 0.7X sales is nicely below the industry average of 1.8X. This is also 89% below its five-year high P/S of 6.9X and a 41% discount to the median of 1.2X. In this regard, LendingTree is also attractive trading at just 0.3X sales and below its industry average of 0.9X. Shares of LendingTree trade 96% below their five-year high of 7.8X and at a 92% discount to the median of 3.8X sales.

Bottom Line

LendingClub and LendingTree stock could certainly have plenty of upside. LendingClub sticks out at the moment with earnings estimate revisions trending higher for FY23 again along with the solid overall growth in its bottom line.

LendingClub stock currently sports a Zacks Rank #1 (Strong Buy) with its valuation very intriguing as well. LendingTree stock doesn’t have quite the same conviction on its top or bottom lines but its valuation is favorable relative to its past. For now, LendingTree stock lands a Zacks Rank #3 (Hold).

One thing is for sure, if either stock can go anywhere near their peaks over the last five years investors will be very happy.

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LendingTree, Inc. (TREE) : Free Stock Analysis Report

LendingClub Corporation (LC) : Free Stock Analysis Report

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