Credit Suisse Lowers LendingClub Price Target Following Earnings Release

LendingClub Corp LC reported its 2Q adj. EBITDA significantly below expectations. The company’s Loan Origination Volume should “theoretically mark the low boundary,” Credit Suisse’s Stephen Ju said in a report. He maintained a Neutral rating on the company, while reducing the price target from $9 to $7.

LendingClub reported its quarterly operating revenue at $102.4 million, ahead of the consensus expectation of $100.4 million and the CS estimate of $97.7 million. Adj. EBITDA was reported at ($30.1) million, substantially below the consensus expectation of ($8.8) million and the CS estimate of ($6.3) million.

Loan Origination Volume was reported at $1.96 billion, versus CS estimate of $1.84 billion. Analyst Stephen Ju reduced the revenue and adj. EBITDA estimates for FY16 from $503.0 million to $493.5 million and from $39.4 million to ($15.1) million, respectively. The adj. EPS estimate for FY16 has been reduced from $0.04 to ($0.10).

Setting A Lower Boundary

“2Q16's Loan Origination Volume of ~$2b should theoretically mark the low boundary as Lending Club shored up its supply of capital – with different types of investors returning to the platform at different speeds given varying levels of scrutiny in their due diligence processes,” Ju wrote.

Although LendingClub’s earnings report gives “an incremental level of comfort” to the near-term estimates, shareholders are uncertain about the long-term impact to operating margin “as the company contemplates investor acquisition costs which to date have been minimal to shore up supply of capital,” the analyst commented.

Management projected the potential impact at ~5 percent of contribution margin. Ju noted, however, that given the uncertainty, this has not been incorporated in the model.

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