Canaccord Initiates Buy on LendingClub Corp; Sees 65% Upside for the Stock
In a research report published today, Canaccord analyst Michael Graham initiated coverage on shares of LendingClub Corp (NYSE:LC) with a Buy rating and a $24 price target, which represents a potential upside of 65% from where the stock is currently trading.
Graham wrote, “While this is a long-term recommendation and not necessarily a call on Q2 results, we do believe business trends remain strong. LC’s next largest competitor, Prosper, announced record originations in Q2 which we believe is a good sign that online lenders continue to take share. We expect investors to be focused on Q2 originations as well as marketing efficiency reflected in LC’s contribution margin (44% in Q1).”
Furthermore, “We believe LC can originate nearly $8B in loans in 2015, $12B in 2016, and over $35B in 2020. We expect the company can grow revenue by 85% this year, 56% in 2016, and 48% in 2017. We believe the company can generate an EBITDA margin above 30% by 2020, with a good opportunity for upside.”
However, “Over the medium and long term, there is significant business risk if LC’s credit models do not accurately predict default risk; if borrowers don’t earn an attractive risk-adjusted return, liquidity will dry up over time.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Michael Graham has a total average return of 14.8% and a 55.4% success rate. Graham is ranked #181 out of 3721 analysts.
Out of the 7 analysts polled by TipRanks, 3 rate Lendingclub Corp. stock a Buy, 3 rate the stock a Hold and 1 recommends Sell. With a return potential of 60.6%, the stock’s consensus target price stands at $23.30.