LendingClub Stock Has 20% Upside, Sterne Agee CRT Predicts

• Shares of LendingClub Corp LC have been treading a downward path in 2015 and are down 49 percent year-to-date.
• Sterne Agee CRT’s Henry J. Coffey Jr. upgraded the rating on the company from Neutral to Buy, while maintaining a price target of $16.
• Ongoing sell-off in LendingClub’s shares and expectations of continued revenue growth make investment in the company an attractive option, Coffey mentioned.

The continued sell-off in LendingClub’s shares has made the stock available at an attractive discount, analyst Henry Coffey mentioned. He added that the company’s revenues, net income and adjusted EBITDA are expected to grow at an aggressive pace over the next five years.

LendingClub reported higher-than-expected adjusted earnings GAAP profits for 3Q15, while guiding to robust results for the remainder of FY15 and FY16. The company’s 2016 and 2017 earnings are, however, expected to be restricted by modestly higher marketing product development expenses.

The EPS estimates for FY16 and FY17 have been reduced from $0.38 to $0.30 and from $0.75 to $0.70, respectively.

Coffey believes that the biggest risk facing LendingClub is “in many respects, its likely success which should, over the next 4-5 years, result in the company originating $30 to $35 billion a year in loans and managing $42 to $48 billion in consumer loans.”

“Over time, we think the challenges associated with this will result in the company partnering with or selling to a top ten credit card issuer,” the Sterne Agee CRT report stated, while adding that as the credit cycle follows its course, competition/customer acquisition cost will come under pressure resulting in higher credit losses.