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Analysts Watching LendingClub's Slowing Growth

Wayne Duggan

LendingClub Corp (NYSE: LC) shares tanked Wednesday despite reporting a 16-percent increase in fourth-quarter revenue. LendingClub reported an adjusted loss per share of 1 cent on the quarter, up from a 3-cent loss in the same quarter a year ago.

The company guided for fiscal 2019 net revenue of between $765 million and $795 million and a net loss of between $9 million and $29 million.

Credit Suisse’s Take

Credit Suisse analyst Stephen Ju said LendingClub appears to be sacrificing revenue growth in favor of expanding its margins.

“Given the ongoing cost optimization focus (BPO in Origination & Servicing and Engineering, as well as moving to the lower cost campus in Salt Lake City), exiting 2019 Adjusted EBITDA margins are expected to approach 20% which will see the company attain the previously-offered long-term target relatively sooner,” Ju wrote in a note.

LendingClub guided for between 10 percent and 14 percent revenue growth, below the 15 percent to 20 percent revenue growth rate the company suggested at its Investor Day event in 2017. However, management said its focus on improving its credit risk is part of the decision to ease off on its growth trajectory.

Ju reiterated his Neutral rating and $$ target price for LendingClub.

Wedbush Weighs In

Wedbush analyst Henry Coffey said the slowing revenue growth is a red flag for investors.

“We are holding our FY revenue estimates at their current level and assuming revenue and loan origination volume growth of 11-12% per year over the next three years,” Coffey wrote.

View more earnings on LC

Wedbush is also projecting a three-year average EBITDA growth rate of 22 percent.

“LC's primary challenge at this juncture is attracting enough prime quality borrowers while controlling cost,” he said.

Coffey reiterated his Neutral rating buy lowered his price target for LendingClub from $4.50 to $3.75.

Shares traded down 6.6 percent to $3.37 at time of publication.

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Latest Ratings for LC

Date Firm Action From To
Aug 2018 Citigroup Maintains Neutral Neutral
Jul 2018 Citigroup Maintains Neutral Neutral
Jul 2018 Morgan Stanley Downgrades Overweight Equal-Weight

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