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LendingClub, FedEx, Applied Materials and Williams-Sonoma highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – November 19, 2021 – Zacks Equity Research Shares of LendingClub Corporation (LC - Free Report) as the Bull of the Day, FedEx Corporation (FDX - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Applied Materials, Inc. (AMAT - Free Report) and Williams-Sonoma, Inc. (WSM - Free Report) .

Here is a synopsis of all four stocks:

Bull of the Day:

LendingClub Corp. went public in 2014 as a purely digital peer-to-peer lending firm. LC struggled for years for various reasons. The firm then found new life amid the global fintech boom and LendingClub changed its long-term trajectory when it purchased Radius Bancorp in the early part of 2021.

LC’s Fintech Story

LendingClub is a diversified, web-based lending company that allows customers to take out loans for almost any purpose, from auto loans and other larger purchases such as home improvements to paying down credit card debt. The firm normally allows people to borrow up to $40,000, typically with a fixed term and fixed interest rate, on a regular monthly payment schedule.

The company boosted its long-term outlook when it bought digital-only bank Radius Bancorp. The acquisition, which closed in February 2021, enabled LendingClub to keep more of the loans it generates on its own balance sheet.

For example, it retained $636 million of loans, or about 20% of originations during Q3. This was “in line” with its 15% to 25% target. The practice allows the firm to collect recurring interest income instead of simply selling off all of the loans it generates. The deal also provides a more direct pathway to becoming a modern, digital-based bank, with a consumer focus.

The company utilizes its AI-driven “credit decisioning” and machine-learning models to help determine what customers it will provide loans. LendingClub boasts that its models help it offer lower credit rates, while also reducing its own delinquency rates—35% lower delinquency rates compared to the competitive set. Since its founding in 2007, nearly 4 million members have taken on various loans through the company.

LendingClub’s growth potential is rather large in a world driven by credit and digital financial services, both large-scale and on the consumer level. Its digital focus will help it grow and the firm is already seeing “half of its members come back for a second loan.” CEO Scott Sanborn said on its earnings call that it benefits since the “loans originate at a fraction of the cost compared to loans to new members and demonstrate lower credit risk.”

The revamped LendingClub is currently expanding its portfolio with newer products. These include products like auto loan refinancing and its entry into the red-hot “buy now, pay later” space. More broadly, the revamped LendingClub aims to offer a “broad range of products, helping our customers manage their lending, spending and savings.

Recent Performance and Outlook

LendingClub topped our Q3 estimates at the end of October, with revenue up 246% YoY and 20% sequentially, which is a better comparison given the timing of its Radius Bancorp deal. Meanwhile, new recurring streams of net interest income grew 42% sequentially and marketplace revenue grew 15% sequentially.

The company’s deposits grew 12% sequentially to $2.8 billion. And it crushed our adjusted earnings estimate for the third period running.

Looking ahead, Zacks estimates call for LendingClub’s fiscal 2021 revenue to soar 156% to $804.1 million, with FY22 set to climb another 41% higher to $1.13 billion. And it’s expected to swing from an adjusted loss of -$1.53 a share to +$0.11 this year and then skyrocket all the way to +$1.52 in 2022.

The nearby chart shows how far LC’s consensus earnings estimate have climbed since its report, with FY21 up from -$0.12 to its current levels and 33% higher for FY22. This bottom-line positivity helps LendingClub earn a Zacks Rank #1 (Strong Buy) right now.

Other Fundamentals

LendingClub shares have certainty skyrocketed in the last 12 months, up well over 500% from under $7 a share to Thursday’s $41 per share levels. Luckily, LC shares have cooled off a bit as Wall Street took profits after its huge post-Q3 release surge from around $32 a share to nearly $50 in only a few sessions.

The stock is now trading around 15% below its recent highs and it’s fallen from above overbought RSI levels (70 or higher) back down near neutral at 52.

LendingClub is also trading at a 33% discount to where it was three months ago at 30.1X forward 12-month earnings. This backdrop could provide the stock with room to climb, especially considering some analysts have raised their price targets to well over $50 a share recently.

Bottom Line

LendingClub is part of a larger group of fintech companies expanding their scope in an effort to become something akin to modern digital native banks poised to thrive in the digital-everything world.

LC is currently focused on the consumer side, while others such as Square (SQ) are trying to do both. But Square stock trades at around $230 a share. This makes Square a bit less attainable for some investors and SQ trades at sky-high forward 12-month earnings multiples.

LendingClub lands an “A” grade for Growth in our Style Scores system and its industry sits in the top 30% of over 250 Zacks industries. Plus, three of the five brokerage recommendations Zacks has are “Strong Buys,” with nothing beneath a “Hold.”

Bear of the Day:

FedEx is likely prepared to grow for years to come and the global delivery firm’s expanded reach within e-commerce helped it soar during the pandemic. But the stock has become a victim of its own success and FDX faces substantial near-term headwinds in the form of rising labor costs and supply chain bottlenecks.

FDX’s Story

FedEx over the last several years has cut ties with Amazon, modernized its automation efforts and invested heavily in optimizing its last-mile residential deliveries. All these efforts were done in the name of e-commerce expansion. The firm remains committed to its business-to-business segment, but e-commerce is where much of its growth will come from for years.

The global shipping powerhouse pulled in $69 billion in FY20. The company’s e-commerce efforts then paid off in a big way last year, when FedEx’s FY21 revenue soared 21% to $84 billion—period ended on May 31.

FedEx executives last year cut their timeline for overall industry expansion, as the coronavirus pushed e-commerce adoption into overdrive. But it is experiencing some turbulence at the moment, largely due to broader economic factors outside of its control.

FedEx said last quarter that the tight labor market added $450 million to costs, in the form of higher wages, increased overtime, and other expenses. Executives also said that supply chain setbacks have lowered demand for shipping, with digital sales even taking a hit as more shoppers head to stores or pick up digital orders themselves.

Bottom Line

FDX has now fallen 13% in the last year compared to the Zacks Transportation sector’s 10% climb. More recently, FedEx shares are down 9% in the past three months, which included a nice comeback that coincided with the broader market rally that began in early October.

FDX’s consensus earnings estimates have fallen since it released its Q1 FY22 results and provided updated guidance on September 21. Its Zacks consensus estimates for the current quarter dropped 14% since then, with its FY22 EPS projection 8.5% lower and FY23’s 4.5% off the pace.

FedEx’s downward earnings revisions activity helps it land Zacks Rank #5 (Strong Sell) at the moment. The stock is also headed back down toward its 50-day moving average recently. Therefore, it might be best to stay away from FedEx stock for the time being. 

Additional content: 

 

Market Lose Steam; AMAT, WSM Lower After Earnings

Market indexes couldn’t keep up the positive energy throughout the trading day yesterday, with a pronounced temporary sell-off mid-morning today across the board. The S&P 500 and Nasdaq managed to close the day in the green — +0.34% and +0.45%, respectively — to fresh all-time closing highs. The Dow failed to make it there, -0.17%, and the Russell 2000 fell -0.56% in the Thursday regular session.

After the close, earnings reports from Applied Materials and Williams-Sonoma sent those stocks lower in late trading.

While we’ve seen the profit-taking pullback in the Dow over recent sessions, the S&P and Nasdaq — up +4.6% and +5.7%, respectively, in the past month alone — continue to let it roll. Here in the late stages of earnings season, however, we often see investors display a measure of buying exhaustion and take a break. The good news is that late Q4 is usually a very robust time for market bulls. And if we follow the lead of analysts casting an eye back toward cyclicals, then we may expect the Dow to pick up the pace going forward, as well.

In the very near-term, we’ll be going through a lull in economic data reports for the next few sessions. That is, until Wednesday morning next week rolls around and brings us half a dozen econ metrics — including a Q3 GDP revision, Durable Goods and Weekly Jobless Claims — ahead of the long Thanksgiving Weekend. In the meantime, we’ll continue on with significant reports here at the back end of earnings season.

Applied Materials met earnings estimates on its fiscal Q4 report after Thursday’s close at $1.94 per share, +55% above the year-ago quarter. Yet shares fell -8.5% almost immediately upon release, as the semiconductor giant’s top-line missed estimates: $6.12 billion versus $6.33 billion in the Zacks consensus. Further, guidance was reduced to below consensus for both top and bottom lines in AMAT’s fiscal Q1.

Ongoing supply chain issues have apparently hit Applied Materials, like so many other goods-reliant companies this quarter. Semiconductor Systems brought in $4.31 billion for the quarter and Applied Global was $1.4 billion. Shares of AMAT have moderated somewhat since the initial sell-off in the late session, now down -5%. Applied Materials had been up +82.7% year to date.

Meanwhile, WilliamsSonoma managed to beat expectations on both top and bottom lines after the close Thursday, earnings of $3.32 per share on $2.05 billion in sales outpaced the estimates of $3.11 per share and $1.99 billion, respectively. Comps at both West Elm and Pottery Barn were up for the quarter, and the company looks well-set for holiday shopping season. Yet shares dropped -6.2% in late trading on the earnings release.

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