LendingClub shares spike 9% after Maxim upgrade: is it time to buy?

On Friday, LendingClub Corp (NYSE:LC) shares surged 9% after Maxim Group analysts upgraded the stock from neutral to buy, citing its recent purchase of Radius Bank. Analyst Michael Diana said that although the company could experience short-term headwinds, the purchase could yield significant catalysts in the long term.

In a note to investors, Diana wrote: 

The first full quarter of the acquisition shows solid execution and gives us higher confidence in LC’s new business model, strategy, and the related earnings implications.

The analyst also set a LendingClub price target of $35.00 per share, implying an upside potential of about 32% from Thursday’s closing price.

However, Maxim’s buy rating contradicts Street analysts’ neutral rating. 

So, should you invest in LendingClub shares now?

From a valuation perspective, LendingClub shares trade at a forward P/E ratio of 36.73, making the stock less attractive to value investors. Furthermore, analysts expect LC earnings per shard to fall by 583% this year before rising 114.70% next year. 

Therefore, the company’s earnings growth prospects are also less exciting, meaning growth investors may opt for alternatives. However, investors willing to overlook the short-term turbulence by targeting synergies from LendingClub’s purchase of Radius Bank could buy the stock for the long term.

Technical overview: LendingClub stock price forecast for Q3 2021

LendingClub shares are up more than 200% this year and over 410% over the last 12 months. As a result, the stock has moved to overbought conditions of the 14-day RSI in the intraday chart. Therefore, a pullback could be imminent.

Investors can target potential pullback profits at approximately $25.84 or lower at $22.48. On the other hand, those looking for extended gains can profit at around $31.79 or higher at $35.16. LendingClub shares traded at $28.84 at the time of writing.

Bottom line: the case for selling LC stock now

In summary, although Maxim Group analysts predict significant long-term catalysts from LendingClub’s purchase of Radius Bank, the company could experience short-term headwinds, pushing the stock price lower.

Furthermore, LendingClub shares surged to overbought conditions following Friday’s spike. Therefore, a short-term pullback seems inevitable. It may be best to wait for the pullback before buying or short the stock for downward profits.