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Online financial services platforms are everywhere these days with Loan tree (NASDAQ: TREE) and Loan Club (NYSE: LC) two of the most popular. Like many other industries, consumer credit is moving rapidly to digital. This transformation along with expectations of rising interest rates is prompting investors to look for ways to play in the online lending space.

LendingTree and LendingClub are on the shortlist. On the surface, they appear to be two peas in a pod, but there are a few key differences. Both fall into the average capitalization range but they took very different paths to get there.

LendingTree has been listed on the Nasdaq since 2008 while LendingClub has been publicly traded since 2015. LendingTree has climbed above $ 400 in 2019, but has struggled in the pandemic economy and is down 43% since the start of the year. year. Conversely, LendingClub got off to a dismal start and yet, two years from a 1 to 5 reverse split, it has climbed 353% this year.

This astonishing reversal of fortunes has given LendingClub a market value that is more than double that of LendingTree. So, is it better to invest in the waning veteran of LendingTree or the rejuvenated newcomer that is LendingClub?

How are LendingTree and LendingClub different?

LendingTree has been around since 1998. It is a pioneer in the field of loan comparisons and has accumulated over 500 lender relationships. Consumers are drawn to free credit scores and scans and can choose from a wide variety of mortgages, personal loans, and insurance products. LendingTree is a more diverse company than it was ten years ago, when it was primarily a lending market. Today, the insurance segment generates more revenue than the home and consumer loan segments.

LendingClub also operates an online marketplace for loans, but it behaves more like a digital bank. Consumers must become members to access its loan products and services as well as its savings accounts above market rates. As a 3.8 million member club, The LendingClub platform has a sense of exclusivity that sets it apart from LendingTree and other digital lending technologies. The bank-like business model is also evident in LendingClub’s unique investment and institutional offerings.

What are the prospects for LendingTree and LendingClub?

LendingTree’s home and consumer lending business has performed well lately, but the insurance segment has been a drag. A turnaround is expected next year when all three divisions should do well. Demand for credit cards, personal loans and small business loans is expected to improve as the economy recovers. As insurance providers expand their product offering, LendingTree also plans to drive its growth from having more diverse insurance partnerships. This should help offset any weakness in mortgage financing activity as consumers hit the pause button due to rate uncertainty. Overall, sales are expected to exceed pre-COVID levels in 2022 and BPA is expected to double.

LendingClub has been operating for a long time with a net loss. That should change next year when the company is expected to make a profit. While waiting for the results of its fourth quarter report, it could even make a small profit for 2021. Last week, LendingClub reported record profits of $ 27.2 million, which blew its forecast for the third quarter. . Strong revenue growth and better management of fixed costs should continue over a very profitable year 2022, which is why the stock has been increased so much.

Are LendingTree or LendingClub the best stocks to buy?

The fundamentals are heading in the right direction for LendingTree. Its cash flow is increasing and its long-term debt is shrinking. Increasing marketing spend to tackle competitive threats will be a key theme to watch, but ultimately a more diverse, all-cylinder business model should pay off. Earnings growth is expected to accelerate in 2022 and the stock is expected to regain favor with investors.

LendingTree has already found favor with Wall Street companies that have a unanimous “buy†rating on the stock. Over the past week, four analysts reiterated their buy ratings, with most price targets going well in the $ 200 range. The Street is mostly bullish on LendingClub, but after the stock’s meteoric rise, the rise is limited. Based on Credit Suisse’s recent $ 34 target, there might even be a downside.

Loan Club is a booming business. Membership grows and with it, loan origination and interest in ancillary products increase. It has been well telegraphed that the company’s finances are improving rapidly and profitability is near. Unfortunately, this has been built into the course of action a lot and buying here feels like a performance race. If the title experiences a significant decline, it can become attractive, otherwise it is better to stay on the sidelines.

Ultimately, LendingTree is in recovery mode and as such there is an opportunity for investors to step in when sentiment and stock price are low. LendingClub is arguably the most popular title, but investors are more likely to get burned.