LendingClub Analyst Coverage and Price Targets

Today marks the end of the quiet period for the LendingClub (LC) IPO. That means that LC’s IPO underwriters are now able to publish their analyst coverage of the company. From a high level, the major analysts on average are targeting $22.50/sh and a neutral rating, with upside potential in the long-term should LC is able to continue to execute their high-growth and industry-disruptive model.

Below is a summary from each analyst report since the inception of the stock as well as the link to download the full report. Current stock price: $22.06.

 

Latest Analyst Reports

Goldman Sachs

Published: 1/20/2015 | 12-mo Price Target: $22.00 | Rating: Neutral

Summary: We are initiating coverage of LendingClub with a Neutral rating and $22, 12-month price target. LendingClub is an online peer-to-peer lending marketplace that connects individual and SMB borrowers to individual and institutional investors. While LendingClub has seen early success in developing an online marketplace for the large addressable market of US revolving consumer credit with the ability to grow the market and enter adjacent product categories, with the stock trading at 86X 2016E EV/EBITDA (16X EV/Sales, we believe this outsized growth is largely reflected in its valuation. Therefore, we initiate with a Neutral rating.

Morgan Stanley

Published: 1/20/2015 | 12-mo Price Target: $22.00 | Rating: Equal-weight

Summary: Lending Club has leveraged technology to redefine the borrower and lender experience and establish itself as the leading marketplace lending platform. We see a significant runway for growth given a large addressable market, but valuation appears full at current levels. Initiate at EW with a $22 PT.

Stifel Nicolaus

Published: 1/20/2015 | 12-mo Price Target: $23.00 | Rating: Hold

Summary: We are initiating coverage of LendingClub Corporation with a Hold rating and $23 fair value estimate. Lending Club is the world’s largest online peer-to-peer lending marketplace and matches borrowers and investors without taking on direct credit risk. In our view, the company has assembled a solid management team with a balance of technology and traditional underwriting and risk management expertise, and has demonstrated foresight in its young history in choosing its business model and in being proactive with regulators. While we believe the company has an attractive long-term opportunity, we remain on the sidelines given what we view as the company’s premium valuation.

William Blair

Published: 1/20/2015 | 12-mo Price Target: N/A | Rating: Outperform

Summary: Lending Club is a clear leader addressing a large market opportunity in lending. The company has a high-growth model with scalable margins that is expected increase EBITDA margin from 9.1% in 2014 to 18.0% in 2016, though still below the long-term targeted EBITDA margin of more than 40%. It also continues to engage in multiple opportunities to address new market segments  by leveraging their cost structure advantage versus traditional banks. These new segments could include the student and automible loans that make up a combined $2.3 trillion market. Moreover, Lending Club offers a disruptive platform that provides value to borrowers and investors. From a risk perspective, the company is subject to significantly more regulatory oversight than other Internet marketplace company, changes in investor demand during a rising interest rate environment, competition creating price pressure, and unforeseen challenges when entering new loan markets.

Previous Analyst Reports

Susquehanna

Published: 1/13/2015 | 12-mo Price Target: $19.00 | Rating: Neutral

Summary: We project that LendingClub will maintain robust revenue growth even after four years of triple-digit expansion. We model 65% revenue growth in 2015 and 60% in 2016 to reach $344 mln and $551 mln, respectively. We are modeling $0.17 and $0.49 in 2015 and 2016 adjusted EPS on adjusted EBITDA of $66 mln and $185 mln, respectively. The $21 price as of January 12, 2015 indicates a market cap of $8.3 bln, within the range of a Neutral rating with a $19 price target.

 

Stern Agee

Published: 1/13/2015 | 12-mo Price Target: $17.75 | Rating: Underperform

Summary: While enthusiastic about this company’s prospects and innovative approach to installment lending, we think the shares have gotten ahead of themselves. We are initiating a price target of $17.75 and a rating of Underperform. Concerns include credit quality over time because Lending Club has seen growth during a generally credit environment, competition from other lenders, and regulatory issues as it expects to manage over $30 billion by the end of 2017.

BTIG

Published: 12/15/2014 | 12-mo Price Target: $31.00 | Rating: Buy

Summary: We are reiterating our BUY recommendation on Lending Club (LC) while increasing our price target to $31 (from $19) based on 0.8x the company’s FY16E total loan originations of $13.7bn discounted back at 10%. We observed that during the company’s pre-IPO venture-round capital raises, its valuation was consistently between 0.8x and 0.9x its total origination figure. Even the $15 price at which LC went public translated into a market capitalization of $5.4bn, or 0.87x its approximately $6.2bn of loan originations at the time of the offering, giving support to the use of a multiple of total originations as a consistent valuation methodology for the company. We acknowledge that we were overly conservative with our initial price target on LC, which was based on a 15x multiple of its FY18E adjusted EBITDA, and we believe a significant premium valuation is warranted given the company’s remarkable growth potential. As consumer awareness of the benefits of LC versus traditional banks becomes widespread, we believe a consumer preference shift is likely to occur that would be akin to previous shifts such as those from traditional booksellers like Borders to Amazon and from video rental firms like Blockbuster to Netflix. As in those two examples, the early adopters of LC are likely to be joined by a large portion of the mainstream market over time. We also believe LC is likely to use a significant portion of the estimated $751mm in cash on its balance sheet after its IPO to make accretive acquisitionsthat would further accelerate its already very rapid growth rate.