LendingClub Growth Might Not Be What You Thought, Sterne Agee CRT Analyst Warns

Sterne Agee CRT's Henry J. Coffey downgraded the rating on LendingClub Corp LC from Buy to Neutral, while reducing the price target from $10 to $8.

"Given the overall size of the potential market for prime-based installment loans, small business products, health care finance, and other soon-to-be-announced products being originated and serviced by LC, our expectations for origination growth have always been very high," Coffey said.

However, the analyst believes that to be able to fully exploit this opportunity, LendingClub would need funding from a "more controllable, more conventional" source, such as an asset based programmed or a committed securitization facility, access to a bank conduit program or entering into a partnership with a major credit card provider.

The 2017 and 2018 origination growth estimates have been reduced due to concerns regarding the capacity of the marketplace model to fund volumes.

The 2017 and 2018 EPS estimates have also been lowered from $0.65 to $0.53 and from $1.05 to $0.78, respectively.