What Happened?
Shares of digital lending platform LendingClub (NYSE:LC) jumped 4.6% in the afternoon session after the Federal Reserve reduced its benchmark interest rate, a move that boosted the financial technology sector.
On December 10, the central bank lowered the key interest rate by 25 basis points to a range of 3.5-3.75%. A lower interest rate environment is considered helpful for fintech companies like LendingClub. The change can positively affect technological improvements and product innovation in the sector. The market's reaction reflected optimism that lower rates would provide a favorable backdrop for the company's business operations. This rate cut marked the continuation of the Fed's policy adjustments, following previous reductions earlier in the year.
After the initial pop the shares cooled down to $20.62, up 4.4% 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 7 days ago when the stock gained 3.6% on the news that 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.
LendingClub is up 27.8% since the beginning of the year, and at $20.62 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 $2,266.
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