Fintech stocks are an intriguing play right now. Over the past five years, they've endured the pandemic and pandemic-related inflation, the fastest-ever increases in the federal funds rate, the regional banking crisis of 2023, and then the "Liberation Day" global turmoil.
Yet with interest rates now on their way down and the economy seemingly getting back to a "normal" environment, surviving fintech stocks could be big winners.
LendingClub (NYSE: LC) is the oldest and most seasoned of these new-aged lenders, and has in many ways executed better than newer peers through the recent downturns. Nevertheless, its valuation has badly lagged peers such as SoFi Technologies and Upstart Holdings.
On its recent earnings call, in which the company handily beat estimates, CEO Scott Sanborn noted LendingClub will undergo a rebranding soon.
A new brand typically isn't that important for a stock; but in this case, it could go a long way.
Ditching the old name and the old model
On the recent third-quarter conference call with analysts, Sanborn noted that the company is being very deliberate with the rebranding, which should take place in the "middle-ish" of next year:
We built up equity in this brand after almost 20 years. We think a new brand will give us a broader permission set with our customer base, and kind of create new opportunities for us. But we've got to make sure we don't lose the tens of thousands of positive reviews and awards and our conversion rate that we finally honed across all these channels ... so lots of work to do.
Why is LendingClub rebranding? A massive discount.
It's somewhat surprising LendingClub is rebranding, given its high customer satisfaction metrics. Customers rate the company 4.83 stars out of five, according to reviews collected by BazaarVoice, and LendingClub has a very high net promoter score of 81, indicating high customer loyalty.
However, LendingClub's valuation has lagged its main public market peers Sofi and Upstart by a significant amount on price-to-book, forward price-to-earnings, and price-to-sales ratios:
One might attribute LendingClub's lower valuation to two things. First, the company's original model was facilitating loans between personal loan borrowers and retail investors looking for a high-yield investment.