Wedbush Double Upgrades LendingClub After 'Significant' Business Improvements

LendingClub Corp LC reported Tuesday first-quarter results that shows the company made "significant gains across all fronts" over the past three years, according to Wedbush.

The Analyst

Wedbush's Henry Coffey upgraded LendingClub from Neutral to Outperform with a price target lifted from $3.75 to $5.

The Thesis

LendingClub is a "more complex, more diversified" company in the lending marketplace with an improved focus on at-prime to super-prime customers, Coffey said in the note. During the quarter, the company showed an 18-percent increase in origination volumes while net revenue rose 15 percent. Adjusted EBITDA, a "primary focal point," rose 47 percent to $22.6 million.

LendingClub showed a 47-percent increase in grade A loans, while at the same time all grade C and below loans declined. In addition, the company saw higher funding levels by institutional investors and banks. Coffey said these two takeaways support the "durability of the business" and create the possibility for institutional investors to set their own credit underwriting.

Coffey said the company should be able to grow revenue by 15-16 percent a year while adjusted EBITDA margin to net revenue could come close to 20 percent in the back half of 2019, above 22 percent in 2020 and 24 percent in 2021.

Price Action

LendingClub traded higher by more than 15 percent at $3.72 per share Wednesday afternoon.

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