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Here's Why On Deck Capital Is Rebounding Today

Matthew Frankel, CFP, The Motley Fool

What happened

Shares of online small business lender On Deck Capital (NYSE: ONDK) have given investors quite the roller-coaster ride over the past couple of days. After plunging by more than 25% on Monday, the stock recovered about half of its losses on Tuesday. As of 3:30 p.m. EDT, shares of On Deck had gained about 15% on the day.

ONDK Price Chart

ONDK Price data by YCharts

So what

The main reason for Monday's sharp sell-off appears to be the revelation that JPMorgan Chase has decided to cut ties with the lender.

However, it seems that the market may have overreacted to the news. After all, the company grew its loan portfolio and gross revenue by 15% year over year and issued a $50 million repurchase authorization -- a massive buyback plan for such a small company.

Crowd of people cheering

Image source: Getty Images.

Now what

It appears several analysts agree that the company's second-quarter report and conference call weren't as bad as the stock price indicated. BTIG Research raised the stock from "neutral" to "buy," and although analysts at B. Riley cut On Deck's price target from $9 to $6, this still represents nearly double the stock's closing price on Monday.

These two analyst actions likely have a lot to do with today's move. It remains to be seen how much JPMorgan Chase's actions will affect the bank over the long run, but it appears that investors may have had too much of a knee-jerk reaction to yesterday's news.

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Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.