LendingClub Reports First Earnings Results Tomorrow

LendingClub (LC) reports earnings tomorrow after the market’s close as confirmed late last month, their first time ever since they IPOed on 12/15/2014. They will be hosting a webcast/conference call at 5:00pm EST (2:00pm PST) to discuss their financial performance for the period ending on December 31, 2014. Let’s look at three things:

1) Key Focus

The key focus will be on originations performance, which origination fees could make up the majority of their revenues (>90%), and how it is sustaining originations growth through competitive pressure from existing and new players in their markets. Recent institutional investor interest (for loans) in the platform leaves little to doubt that they have continued to enjoy significant growth in this space.

2) Recent Financial Results from OnDeck Capital

OnDeck (ONDK) reported earlier today and beat expectations (top and bottom line) and is up 5.3% during after-hours trading. OnDeck’s core business focuses on small business loans. LendingClub shares have been strong earlier today ahead of earnings, closing up +3.8% for the day at $23.78 and up +30% from the low two weeks ago of $18.30.

3) Recent Analyst Coverage

Finally, let’s review what analysts have published so far on the company since their IPO. Analyst 12-month market prices have been all over the place, from as low as $17.75 to as high as $31.00 per share. This could be because of LC’s disruptive business model forces analysts to reply heavily on scale-changing assumptions, which many are not comfortable doing just yet until the future as the company continues to execute their grand plans:

Here are select analyst comments from recent analyst coverage:

The Company has automated traditional bank-based lending functions to save time and money and develop better credit granting decisioning. As such, LC has developed a disruptive business model that poses a threat to the traditional banking industry, particularly in today’s low interest rate and regulatory environment

— FinTrust Brokerage Services

LendingClub is a classic online marketplace model. Growth in revenue and profits will come from growing both sides of the marketplace; efficiently acquiring high-quality borrowers while diversifying its investor base across individuals and institutions.

— Goldman Sachs

Overall, network effects have helped Lending Club grow significantly faster than its peers over the past few years to become the largest peer-to-peer lending marketplace in the world. Barring a material deterioration in loan performance, network effects should help Lending Club continue to be the leader in the category.

— Stifel Nicolaus

We note that LC’s attractive value proposition, in which the company takes advantage of much lower infrastructure costs than credit card-issuing banks to allow borrowers to reduce their borrowing costs by an average of 680bps, puts it in position to attract a significant portion of outstanding U.S. revolving consumer credit.