Morgan Stanley's Takeaways From LendingClub's Loan Numbers
Online lending platform LendingClub Corp (NYSE: LC) released a regulatory SEC filing which shows a weaker-than-expected loan volume growth, according to Morgan Stanley.
The Analyst
James Faucette maintained an Equal-weight rating on LendingClub with a price target lowered from $23.75 to $17.
The Thesis
LendingClub disclosed in an SEC filing that second-quarter standard loan volume rose 5% from last year and 9% from the prior quarter to $2.17 billion, Faucette said in a Friday note. (See his track record here.)
Both of these figures were short of expectations for total origination growth of 10.8% from last year and 14.4% from the prior quarter, the analyst said. Granted, there methodology used in the filings "has its limits" — but it is nevertheless a "helpful indicator" to gain insight into origination growth, he said.
Standard loans represent 71% of LendingClub's origination mix, with the remaining 29% coming from custom loan channels like near/subprime, auto and SMB lending, Faucette said.
These categories represent LendingClub's highest growth opportunities, so it would be a mistake to jump to the conclusion that total originations will miss estimates, he said.
Morgan Stanley's revised $17 price target is based on 11 times 2020 EV/EBITDA on a combination of base and bear case EBITDA assumptions.
The multiple is consistent with the median bank covered by Morgan Stanley over the past two years, which is justified given similarities in how investors view LendingClub through loan growth and credit, the analyst said.
Price Action
LendingClub shares were down 1.52% at $16.23 at the time of publication Friday.
Related Links:
Wedbush Double Upgrades LendingClub After 'Significant' Business Improvements
Analysts Watching LendingClub's Slowing Growth
Latest Ratings for LC
Jul 2019 | Maintains | Equal-Weight | ||
May 2019 | Upgrades | Neutral | Outperform | |
Aug 2018 | Maintains | Neutral | Neutral |
View More Analyst Ratings for LC
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