What Happened?
Shares of digital lending platform LendingClub (NYSE:LC) jumped 3.6% in the afternoon session after JPMorgan raised its price target on the company's stock to $25 from $22 while maintaining an 'Overweight' rating. The investment bank also identified Lending Club as its 'Top Pick,' noting the new target represented a potential 33% upside. This positive view came on the heels of other favorable news for the company. LendingClub had recently reported third-quarter earnings that beat analyst expectations. The company also announced a $100 million stock repurchase program and revealed a new partnership to enter the home improvement financing market, a sector valued at $500 billion.
The shares closed the day at $19.54, up 3.9% from previous close.
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What Is The Market Telling Us
LendingClub’s shares are extremely volatile and have had 31 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 13 days ago when the stock gained 3.8% on the news that investors grew more optimistic about a potential Federal Reserve interest rate cut in December. The positive sentiment was fueled by comments from New York Fed President John Williams, a voting member of the rate-setting Federal Open Market Committee, who stated the central bank could cut rates "in the near term" without jeopardizing its inflation targets. Following his remarks, market expectations for a rate cut in December shifted significantly. According to the CME FedWatch Tool, the probability of a December rate reduction surged from a 37% chance earlier in the day to 70%. While lower rates can compress bank profit margins, investors often view them as a catalyst for broader economic activity, potentially boosting loan demand and reducing the risk of defaults.
LendingClub is up 21.5% since the beginning of the year, and at $19.61 per share, has set a new 52-week high. Investors who bought $1,000 worth of LendingClub’s shares 5 years ago would now be looking at an investment worth $2,215.
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