Lending Club, Death Dive or Buying Opportunity?

Lending Club (LC) stock has been getting pummeled over last six months. LC is underperforming the market and the other big banks like JPMorgan. Is this a buying opportunity or a dive into oblivion? Here is what I found...

Renaud Laplanche, CEO of LC is doing a lot of sailing these days but it appears to be for the right reasons. See Spotlight on Renaud Laplanche. 

Goldman Sachs has announced it is entering the peer-to-peer lending space. Some see this as trouble for LC, as if Lending Club will have a hard time competing with Goldman Sachs. Bullshit. Goldman Sachs is the greatest investment bank on the planet but that doesn't make them a great retail lending operator. This only proves there is giant money to be made in disrupting the banking sector.

Jamie Dimon of JPMorgan recently alerted shareholders in his latest annual letter that “Silicon Valley is coming” to the lending industry. JPMorgan paid a $13B fine to the United States or America with petty cash. More proof that disrupting the banking sector is a huge opportunity.

Barrons published on article entitled Lending Club and On Deck Stocks Too Rich to Buy on June 6, 2015. See excerpts below with {my comments}.

“We plan to enable about $7.6 billion in loans this year,” says Lending Club CEO Renaud Laplanche. “That’s essentially as much as our past eight years combined.”

Even investors who don’t mind paying crazy multiples for a fast-growing Internet business like Lending Club should step to the sidelines as the IPO lockup—the period in which insiders agree not to sell their stock—expires for most shares on June 9.  {If you are long on LC then the end of a lock-up period is a gift from God, not a reason to "step to the sidelines".}

The “peer to peer” lending style of sites like Lending Club is analogous to Uber’s matching of independent drivers with riders. {Uber's market cap is $40B disrupting cabbies, compare that to disrupting bankers.}

A pure marketplace like Lending Club makes money by charging borrowers an origination fee of 1% to 5% of the loan amount and by charging investors a fee of about 1%. {Calling this a "pure marketplace" means it will tend to a winner-take-all. As mentioned in the same article, LC is the "largest lending outfit". Numerous articles confirm that LC is the 800lb Gorilla in the peer-to-peer lending space. If LC continues to dominate the space, they could surpass the market cap of the incumbents like Chase JPMorgan in the not so distant future. Considering JPMorgan has a market cap of over $250B and LC is hovering around $5B (3jul15), that's a lot of upside potential.}

Most importantly, I invested $10k through Lending Club this morning.  I chose a basket of over 100 loans with an estimated yield of over 8%. The entire process took me less than 10 minutes. Are you f'in kidding me? That's amazing!!! 

Finger is on the trigger and twitching...