Lending Club Still In 'Early Days' Of Disruption; Stifel Upgrades To Buy

In a report published Wednesday, Stifel analyst Scott W. Devitt upgraded the rating on

from Hold to Buy, with a $25 price target. Given its strong management team, the analyst believes that the company is well positioned to see significant opportunities going forward. "Shares have underperformed the S&P 500 YTD as investors are concerned about rising competition in the nascent marketplace lending category and were concerned about the first of two large share lock-ups just passed on June 9th," Devitt explained. The marketplace lending sector is expected to continue to witness robust secular tailwinds and appears to be reaching an inflection point, with higher legitimacy among institutional investors and borrowers, as well as several partnership announcements being made by both non-financial and financial firms. The success of the marketplace lending industry has led to competition intensifying. However, LendingClub has seen more or less stable to slightly improving sales and marketing over the last few years. "Importantly, in the segments Lending Club operates in, Prosper is the only competitor of scale, with most emerging platforms specifically going after loan verticals not currently addressed by either platform," the Stifel report said. The analyst believes that it is too early for competition to impact LendingClub, while expecting the company to benefit "disproportionately" from growth in the sector. The management has also recently indicated that the company is set to expand to the whole range of major consumer credit verticals over the next few years. The 2016 and 2017 estimates have accordingly been raised.