Bull Trims Down Price Target on LendingClub Corp (LC) Following Investor Day

Even with lower expectations., Maxim's Michael Diana nonetheless highlights 104% in upside potential for LC shares.


LendingClub Corp (NYSE:LC) shares recovered almost 11% yesterday in value after an over 17% stumble in the market last week following the fin-tech firm’s first ever Investor Day. Yet, even a bull finds himself dialing down his expectations after the LC team revealed a trimmed revenue guide for next year along with underwhelming growth and EBITDA forecasts.

Maxim analyst Michael Diana nonetheless spotlights “long-term positives for LC’s marketplace business model,” but believes for investors and analysts alike, these unfortunately “were overshadowed by the shorter term.” Just how much frustration is making its rounds through the Street? Keep in mind, LC’s adjusted EBITDA guide underperformed to the harsh tune of a $30 to $45 million miss, as the Street had called for an outlook of $120 million.

In reaction, the analyst maintains a Buy rating while scaling back the price target from $8 to $6, which implies a 104% upside from current levels. (To watch Diana’s track record, click here)

The silver lining Diana sees boils down to four key Investor Day takeaways for the fintech firm: “(1) increasing penetration by LC of the massive market for unsecured personal loans to refinance credit card debt; (2) increasing predictability of LC’s credit algorithms; (3) a virtuous cycle of more predictable credit performance producing lower yields demanded by investors, and lower rates for borrowers; and (4) additional sources of income from investors (versus just servicing fees), as additional vehicles are created for investors to participate in loans facilitated by LC.”

“More broadly, LC is the leader in the creation of a new asset class (marketplace consumer loans), around which an ecosystem (including loan aggregators, securitizations, and dedicated ’40 Act funds) is developing, enabling LC to derive additional sources of income from each of the participants in the ecosystem,” Diana asserts, backing LC’s long-term opportunity even amid the near-term pullback.

For 2019, the analyst introduces a 2019 adjusted EBITDA forecast of $13.84 million, which is fueled by a 19% boost in net revenue, compared to the LC team’s long-term guide of 15% to 20%, and a 17.6% EBITDA margin under the LC team’s 20% long-term target.

TipRanks shows cautious optimism that leans toward a bullish majority when it comes to LendingClub’s opportunity in the market. Out of 8 analysts polled in the last 3 months, 5 rate a Buy on LC stock while 3 maintain a Hold. Is the fin-tech firm undervalued or overvalued based on Street-wide expectations? With a return potential of 41%, the stock’s consensus target price stands at $5.50.

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