On Deck Capital Inc ONDK is shaping up to be an attractive alternative lender and Wall Street has been slow to react, according to B. Riley FBR.
The Analyst
Analyst Scott Buck initiated coverage of On Deck Capital with a Buy rating and $14 price target.
The Thesis
On Deck Capital provides short- and medium-term loans and lines of credit through a proprietary online lending platform.
The Street has been slow to recognize that On Deck's business momentum is turning positive, Buck said in the initiation note. (See the analyst's track record here.)
“With upcoming product and partnership announcements, lower credit costs and renewed focus on profitability rather than revenue, we believe future earnings should exceed consensus forecasts."
On Deck has generated over $9 billion in loans, including roughly $2 billion in each of the past two years, by targeting small businesses that do not meet strict bank lending requirements, the analyst said.
On Deck's total addressable market is large, with nearly 30.2 million small businesses in the U.S., Buck said.
The company's proprietary credit scoring platform, OnDeck Score, allows for shorter business history and lower personal credit scoring while taking into account unique aspects of the business that may be better payback indicators than traditional credit metrics.
OnDeck is the only choice for small businesses that find themselves outside of the banking system, Buck said.
“Near-instant credit decisions and same-day funding, vs. a several-week process from a traditional branch bank make OnDeck an attractive alternative to traditional bank borrowing,” he said.
While OnDeck shares responded favorably to better-than-expected results in the second quarter, shares still remain nearly 55 percent below their December 2014 IPO levels.
Price Action
On Deck shares were trading down 0.23 percent at $8.73 at the time of publication Thursday.
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