Lending Club Coverage Initiated with Underperform Rating

Lending Club HQLeading peer to peer platform Lending Club (LC) received its first analyst coverage today as Sterne Agee initiated coverage with an “Underperform” rating and a price target of $17.75.  Lending Club closed today at just over $21 / share down over 8% in an off market day.

Lending Club is the first peer to peer lending platform to publicly trade shares in a widely heralded coming of age event for the young company.  Lending Club was quickly followed by another P2P lender, OnDeck, that listed shares before the end of the year.

Sterne Agee published a pre-IPO report just prior to Lending Club listing on the NYSE.  At that time Stern Agee indicated they believed the price range to be at $13 to $17.  This opinion was prior to the pricing which saw Lending Club list at $15 / share.

Stern Agee was quoted at that time;

“Our expectations are that by 2017, LendingClub will be able to generate in excess of $1 billion in revenue while meeting targeted contribution and adjusted EBITDA margins of 50% and 40%, respectively. We are estimating cash-based EPS for 2015, 2016, and 2017 of $0.15, $0.53, and $0.75, respectively. Our estimated valuation for these shares is based on targeted valuation multiples applied to 2017’s expected cash-based EPS and adjusted EBITDA.”

Lending Club has transacted billions in loans with little in earnings.   Share pricing does not translate to a typical PE as all expectations remain on Lending Club to continue on their dramatic rate of growth.  Industry followers claim the total addressable market for P2P lenders stands at around $2.7 trillion domestically.  Lending Club has indicated it is considering international growth.

 

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