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LendingClub: Not the Industry Disruptor You're Looking For

The no-moat online lender's many headwinds make it a dubious investment even after the stock's recent slump.


Timothy Puls: Peer-to-peer lender LendingClub (LC) is down 50% from its high of $29 in January and 30% since we initiated coverage in June. Despite the fall, the stock is still trading slightly above our $12 fair value estimate, which we consider an unappealing entry point for investors, particularly given the fact that this is a no-moat company, in our view.

While marketplace and peer-to-peer lenders have received a lot of attention of late as potential disruptors to traditional lending, LendingClub faces significant challenges, in our view. The platform does not provide a network effect to fuel growth, nor can it compete with the customer switching costs that banks are able to create with a model that services a client's full financial needs.

Timothy Puls does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.