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Hawk’s Nest

Unusual Call Buys in Consumer Credit Small Cap Looking Strong into 2025

by | Oct 20, 2024

Lending Club (LC) with a couple unusual bullish trades recently, on 10/1 a buyer of 1500 January 2026 $20 calls for $90K and on 10/17 a buyer of 2500 April $14 calls for $400K. LC shares have nearly tripled since Oct. 2023 lows and last week closed above the 200-week EMA for the first time since losing the level in early 2022. The recent breakout move targets a measured move to at least $15.

Lending Club brought a traditional credit product – the installment loan – into the digital age by leveraging technology, data science, and a unique marketplace model. LendingClub now operates a leading digital marketplace bank and is one of a small number of fintech companies with a national bank charter.  LC is leveraging data and technology to increase access to credit, lower borrowing costs, and improve the return on savings – all through a smart, simple, and rewarding digital experience. Its primary loan products include unsecured personal loans, secured auto refinance loans, and patient and education finance loans (Consumer Loans).

LC has a market cap of $1.4B and trades 15.7X Earnings, 4.6X EBITDA, 1.1X Book and has a ROE of 3.4%. Valuation is near the low-end of its historical range and revenues seen rising 21% in FY25 along with 15% EBITDA growth. LC should be set for a strong 2025 as inflation continues to ease, credit quality improves and interest rates move lower. Structured Certificates is a potential upside driver next year which provides buyers with an attractive alternative to warehouse lines or securitizations. LC has lowered the operational cost to originate a personal loan by one-third in the past year with efficiency investments.

LC is now an attractively valued Fintech in an improving consumer credit backdrop with plenty of potential growth drivers from new products.