Key Takeaways:
- The 2-Minute Valuation Model values LendingClub stock at $15 per share in 2 years.
- That’s a potential 50% upside from today’s price of $10 per share, which would signify about 23% annual returns over the next two years.
- LC stock is projected to grow EPS by an extraordinary 224% over the next 3 years.
- The company has successfully pivoted from marketplace lending to full-service digital banking.
- Get accurate financial data on over 100,000 global stocks for free on TIKR >>>
LendingClub (LC), valued at a market cap of $1.14 billion, is a digital marketplace bank that connects borrowers and investors through technology-enabled credit solutions.
Despite the fintech sector facing headwinds from rising interest rates and credit concerns, LendingClub has demonstrated resilience and is positioned for significant earnings growth as credit markets normalize.
With LC stock now trading at about $10.01 per share, LendingClub presents a compelling turnaround opportunity for investors seeking exposure to the digital lending revolution at an attractive valuation.
Let’s examine why this stock could deliver substantial returns.
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What is the 2-Minute Valuation Model?
Three core factors drive a stock’s long-term value:
- Revenue Growth: How big the business becomes.
- Margins: How much the business earns in profit.
- Multiple: How much investors are willing to pay for a business’s earnings.
Our 2-Minute Valuation Model uses a simple formula to value stocks:
Expected Normalized EPS * Forward P/E ratio = Expected Share Price
Revenue growth and margins drive a company’s long-term normalized earnings-per-share (EPS), and investors can use a stock’s long-term average P/E multiple to get an idea of how the market values a company.
Why LendingClub Stock Looks Undervalued
Forecast
Based on analyst estimates shown in the chart below, LendingClub is expected to achieve explosive earnings growth over the next three years.
EPS is projected to surge from $0.45 in 2024 to $1.46 by 2027, representing a remarkable 224% total increase.
The growth trajectory shows strong momentum. For example, 2025 is expected to deliver 42% growth, followed by an exceptional 94% jump in 2026 and solid 18% growth in 2027.
This earnings growth for LC stock is likely to be driven by:
- Credit normalization: As economic conditions stabilize, loan loss provisions should decrease significantly.
- Digital transformation benefits: The company’s technology platform enables efficient loan origination and servicing.
- Market share expansion: LendingClub is gaining ground in the digital lending space as traditional banks pull back.
- Margin expansion: Improved operational efficiency and scale benefits are boosting profitability.
For our valuation, we’ll estimate that LendingClub stock will reach $1.40 in EPS in 2027.
See LendingClub’s full analyst estimates (It’s free) >>>
Valuation Multiple
Today, LendingClub stock trades at around 12x forward earnings, below its 12-month historical average P/E of 17x, as shown in the valuation chart.
For our valuation, we’ll use a conservative forward P/E multiple of 11x. This is well below the company’s historical average and current multiple.
Fair Value of LC Stock
Using our 2-Minute Valuation Model and applying a conservative approach:
- Conservative 2027 EPS estimate: $1.40
- Conservative forward P/E multiple: 11x
Expected Normalized EPS ($1.40) * Forward P/E ratio (11x) = Expected Share Price ($15)
The 2-year expected LC stock price we would get from this valuation is $15 per share.
With LendingClub stock currently trading at around $10 per share, this implies a potential upside of 50% over the next two years or a 23% annualized return.
A 23% annual return is more than reasonable, given that the S&P 500 index has delivered annual returns of 10% over the last six decades.
Remember, this is just a valuation exercise, and we don’t know for sure what the stock’s price will be in the future.
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What is the Average Analyst Price Target for LendingClub Stock?
Wall Street analysts believe LendingClub stock is undervalued at today’s price.
The average price target for LC stock is around $15 per share, suggesting about 54% upside from the stock’s current share price:
Risks to Consider
Despite the bullish outlook, investors should be aware of several risks that could impact the fintech’s growth trajectory:
- Credit cycle risk: A recession could lead to higher loan losses and reduced lending demand
- Interest rate sensitivity: Rising rates could impact loan demand and funding costs
- Regulatory changes: New fintech regulations could affect business operations
- Competition: Traditional banks and other fintech companies are intensifying competition in digital lending
TIKR Takeaway
LendingClub presents an exceptional risk-reward opportunity at current levels. The stock’s significant upside potential is driven by earnings growth, supported by credit normalization and operational improvements, all while trading at historically low valuation multiples.
While the fintech lending sector faces near-term challenges, LendingClub’s digital-first approach and improved risk management position it well for the next credit cycle.
The company’s transformation from a peer-to-peer lender to a comprehensive digital bank creates multiple avenues for growth.
Investors should be prepared for volatility, but LC’s compelling valuation and strong earnings growth prospects make it an attractive option for those seeking exposure to the future of consumer lending.
Is LC stock a buy over the next 24 months? Use TIKR to check the stock’s analyst price targets and growth forecasts to see if it is undervalued today.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
