Goldman Sachs Expecting A Recovery In LendingClub Loan Demand Over Time

LendingClub Corp LC reported second quarter results in which the company lost $0.09 per share on revenue of $102.4 million. Wall Street analysts were expecting the company to lose $0.02 per share on revenue of $100.51 million.

Lendingclub also said its loan origination in the quarter improved to $1.96 billion from $1.91 billion in the same quarter a year ago. The reported metric prompted Goldman Sach's Heath P. Terry to suggest LendingClub will see a "recovery in loan demand" over time and beyond 2016. However, the analyst isn't ready to turn bullish on the stock just yet.

Related Link: Fintech Companies Picking Up Investors Fleeing LendingClub

Terry noted that the outlook LendingClub's management team provided falls short of consensus estimates. Specifically, the company said it expects to see revenue total $95 to $105 million in the third quarter and report an adjusted EBITDA loss of ($30) to ($15) million. By comparison, the consensus estimates were calling for the company to report revenue of $111 million and EBITDA of $7.6 million.

Accordingly, the analyst lowered his 2016 EBITDA estimate to a loss of $38 million to reflect slower loan growth and incremental costs over the remainder of 2016. Looking forward to 2017 and 2018 paints a similar picture as the analyst is expecting the company's revenue and adjusted EBITDA to fall by 11 percent and 16 percent, respectively, on average to reflect the company's ongoing efforts to restructure investor acquisition costs and slower loan growth.

Bottom line, the analyst believes LendingClub will eventually see a recovery in loan demand, but investors require "sustainable proof of that recovery" before an investment in the name is justified.

Shares remain Neutral rated with a price target boosted to $5.00 from a previous $4.70 to reflect "multiple expansion in the category and better visibility into the funding environment."