LendingClub (LC) Reports Good 3Q Beat; Compass Point Maintains a Sell Rating
Compass Point reiterated a Sell rating and $12.00 price target on Lending Club (NYSE: LC) following the company's 3Q earnings results. Adjusted EPS of $0.04 beat consensus by $0.02. Adjusted EBITDA of $21.2M rose from $13.4M in 2Q15 and $7.5M in 3Q14, reflecting an 18.4% margin. Operating revenue of $115M rose 104% YOY. For 2016, management projects YOY operating revenue growth of 70% (vs. consensus of 55%) and 18% EBITDA margins.
Analyst Michael Tarkan commented, "We reiterate our Sell rating and $12 price target on LC after the company reported better-thanexpected 3Q15 results, highlighted by stronger revenue and EBITDA, and relatively in-line originations. The company also provided 2016 revenue and margin guidance that came in ahead of our model and consensus. While Lending Club's near-term growth trajectory has remained intact thus far, we remain cautious primarily due to: (1) increasing competitive risk - new noteworthy entrants continue to emerge; (2) regulatory risk - uncertainty around the company's origination structure and risk retention remain key issues; (3) funding risk - institutional demand remains strong but Santander announced that it is ending its relationship and several investors have reportedly been avoiding certain high-rate loans; and (4) valuation - despite ongoing underperformance, LC still trades at a significant premium to tech peers. As part of this report, we have provided in-depth analysis of the company's 3Q15 underlying loan data, which reveals continued declines in interest rates, increasing average loan balances and borrower debt loads, and declining income verification."
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Shares of Lending Club closed at $13.62 yesterday.