Pacific Crest Upgrades LendingClub To Overweight After Speaking With Ad Execs

In a report published Monday, Pacific Crest analyst Josh Beck upgraded the rating on LendingClub Corp LC to Overweight, while maintaining the price target at $23, after speaking with advertising executives. In the report Pacific Crest noted, "We spoke with half a dozen advertising executives who specialize in consumer financial services. We picked up increasing levels of marketing activity and some moderate pricing increases, none of the behavior or trends stood out as irrational. Investor fears that unreasonable customer acquisition spending threatens the long-term viability of CLV:CAC ratios seems exaggerated relative to our channel checks." Beck expresses optimism regarding LendingClub's ability to control customer acquisition costs, after an in-depth sensitivity analysis with inputs from ad executive conversations. The estimate of an 8 basis point improvement in blended effective cost per funded loan (CPFL) through 2017 could prove conservative. Although Pacific Crest was initially cautious on LendingClub's investments in new markets, the analysis points towards market expansion headwinds being more than offset by core consumer gains. The revenue estimate for 2016 has been raised from $590.0M to $595.0M.