Peer-to-peer lending company LendingClub Corp (NYSE:LC) hosted its 2017 Investor Day on Thursday. The optimistic message relayed at the event was tempered by the muted guidance issued by the company, according to a Morgan Stanley analyst.
The Analyst
Morgan Stanley analyst James Faucette maintained an Overweight on the shares of LendingClub and lowered the price target from $6.50 to $6.
The Thesis
LendingClub narrowed its expectations to a more modest top-line growth of 15-20 percent and margin of 20 percent by 2020, with the narrowing being more than what bulls expected, Faucette said in a Friday note. (See Faucette's track record here.)
The expectations were at least homogenized, the analyst said.
LendingClub also shed light on market opportunity and its internal growth initiatives — but the projected growth and profitability fell short of expectations, Faucette said.
The spelled-out objectives should help align Street and investor expectations, according to Morgan Stanley.
"We expect LC to go through a period of reconstituting its investor base as some growth-oriented investors churn away, but this should [be] positioning the stock to start working again if it can deliver beats/raises against this new, lower benchmark," Faucette said.
Morgan Stanley lowered its 2018 revenue estimate from $697 million to $693 million and also revenue estimate through 2020 to yield $961 million, down from a previous estimate of $976 million.
To account for LendingClub's elevated auto and tech spend, the firm lowered its 2018 adjusted EBITDA estimate from $98 million to $82 million. The 2020 estimate was lowered from $203 million to $189 million.
Offering its key takeaways from the event, Morgan Stanley said:
• After rebuilding over the past 18 months, LendingClub has been rebuilt and re-energized in 18 months.
• Credit and underwriting will remain a focus area for the company.
• Consumer unsecured total addressable market, or TAM, is now seen at $300 billion to $350 billion. This compared to the $390 billion TAM estimated by the company earlier.
• The investor TAM is bigger at $38 trillion in fixed income, and the company plans to tap into it.
The Price Action
Shares of LendingClub are down 32 percent in the year-to-date period.
Related Links:
Analyst Thinks Lending Club Deserves More Credit, Upgrades To Outperform
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