Aug 5, 2022Liked by Jevgenijs Kazanins

Great article but i will take an exception about the company's history as it relates to Q2 2020 recession due to the lock-down being devastating to the company. The declines throughout late 2019-2020 were mostly voluntary, due to LC preparing for the Radius acquisition and shedding the higher risk E-H grade notes. At no point the defaults were any problem for the company as far as i am aware.

As to the conservative nature of Sanborn and rest of the management, I prefer it that way. There is no need to shoot for the moon overnight. LC is already the pioneer and leading digital marketplace bank (neobank) in the U.S. and it needs to grow prudently. My only criticism as a 6 year equity as well as platform investor in the company is their failure to use all marketing channels available to them. LC has an industry low customer acquisition cost BUT that comes at a price. SoFi, which is a relative newcomer, advertises on air, and that creates name awareness. LC needs more name awareness IF they are to become a $30-40 billion neobank one day (and it is doable).

FWIW, my PTs for the stock are $40-50 by the end of next year (provided that a severe recession is avoided) and $200-300 by the end of this decade. At forward P/E of just over 5 and PEG ratio of 0.30 based on my growth estimates, i believe that a proper P/E multiple for LC is closer to 20 than 10 (which is par for course for national banks). $200 PT translates into an EPS of $10 by the end of the decade (or a billion dollars in net income). If LC does a better job of marketing, keeps expanding services, and maybe gobble up a competitor or two to expand its customer base through acquisition, it can reach those levels.

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