Investment Analysis Report

Peter Stolarski

Drafted on July 27th, 2015

NYSE: LC

What is Lending Club?

Lending Club is the world’s largest online marketplace connecting borrowers and investors. They are transforming the banking system to make credit more affordable and investing more rewarding. They operate at a lower cost than traditional bank lending programs and pass the savings on to borrowers in the form of lower rates and to investors in the form of solid returns.

Personal Loans

The application process for loans through Lending Club is simple, yet efficient. It is structured in a way that attracts customers through simplicity while still giving the information needed in order to make a proper decision. The investor can contact the borrower directly and negotiate a rate on the loan.

Borrowers who used a personal loan via Lending Club to consolidate debt or pay off high interest credit cards report in a survey that the interest rate on their loan was an average of 7.0 percentage points lower than they were paying on their outstanding debt or credit cards.

The result of this outstanding service was a 4.9 out of 5 customer rating after 6,073 reviews. This shows that customers are extremely satisfied with the service they received and will probably recommend the service to their friends. This will raise revenue for Lending Club and lead to impressive growth in the number of customers serviced.

Business Loans

Business loans are similar to personal loans in their efficiency and simplicity. Over $7 billion in loans have been issued to businesses with a 95% satisfaction rate.

Powerful Business Model

This customer friendly, interactive and unique business model makes Lending Club poised for success in the loan industry. Lending Club, as expected from a company straight out of Silicon Valley, utilizes cutting edge technology to gain an edge in the market.

By providing borrowers with better rates, and investors with attractive, risk-adjusted returns, Lending Club has earned among the highest satisfaction ratings in the financial services industry.

Great for Investors

• Outstanding returns averaging between 5.06% and 8.74% • Monthly cash flow • Simple and straightforward applications and payments • Allows investor to spread risk over multiple loans, all managed in one place • Offers 401(k) rollover and retirement accounts

Great for Borrowers

• Simple applications and payments • Low fixed rates • Fixed monthly payments • Flexible terms • No prepayment penalties • No hidden fees • Friendly customer service

Transparency and Privacy

Lending Club dedicates itself to protecting customer privacy and information. Unlike many loan agencies, Lending Club does not sell information about its customers to third parties. This offers customers a sense of security and trust for Lending Club. Lending Club also dedicates itself to transparency, which also builds the sense of security. As represented on the next page, Lending Club uses its transparency to display its outstanding performance.

Performance

Lending Club has demonstrated impressive growth in almost every aspect of its business. Total loan issuance has grown almost exponentially and quarterly loan issuance has an entirely established uptrend.

These charts as well as other information which demonstrates the solidity of Lending Club’s business can be found at https://www.lendingclub.com/info/statistics.action.

Based on the solid business performance at Lending Club, one would expect the stock to be performing superbly. However, as demonstrated on the next page, this is not the case.

Undervaluation

The average price on July 27th, 2015 was roughly $14.25. This low price represents a complete undervaluation of the stock. The price’s movement is contrary to the price targets and ratings established by major investment banks and prestigious stock analysis firms.

Price Targets:

Mean Target: $21.69 Median Target: $23.00 High Target: $31.00

Ratings:

Stifel: Upgrade to Buy Morgan Stanley: Upgrade to Overweight Zacks Rank: Strong Buy

These price targets and ratings, combined with the analysis conducted by the author, point to a blatant undervaluation of Lending Club shares. This is due to fear over share lockup expiration, which occurred on June 9th, 2015. This fear has had lagging effect on the stock. Combined with the lack of news on Lending Club, investor attention has been diverged. The earnings report for Lending Club is set to be released on August 4th, 2015. The expected outperformance of the report will attract some much needed attention to the stock. Given a powerful trigger, the stock’s value should increase substantially.

Technical Analysis

Verdict

Given the undervaluation as well as the strong business model of Lending Club, the author rates this stock as a strong buy.