LendingClub (LC) Reports Good 3Q Beat; Compass Point Maintains a Sell Rating

Compass Point reiterated a Sell rating and $12.00 price target on Lending Club (NYSE: LC) following the company's 3Q earnings results. Adjusted EPS of $0.04 beat consensus by $0.02. Adjusted EBITDA of $21.2M rose from $13.4M in 2Q15 and $7.5M in 3Q14, reflecting an 18.4% margin. Operating revenue of $115M rose 104% YOY. For 2016, management projects YOY operating revenue growth of 70% (vs. consensus of 55%) and 18% EBITDA margins.

Analyst Michael Tarkan commented, "We reiterate our Sell rating and $12 price target on LC after the company reported better-thanexpected 3Q15 results, highlighted by stronger revenue and EBITDA, and relatively in-line originations. The company also provided 2016 revenue and margin guidance that came in ahead of our model and consensus. While Lending Club's near-term growth trajectory has remained intact thus far, we remain cautious primarily due to: (1) increasing competitive risk - new noteworthy entrants continue to emerge; (2) regulatory risk - uncertainty around the company's origination structure and risk retention remain key issues; (3) funding risk - institutional demand remains strong but Santander announced that it is ending its relationship and several investors have reportedly been avoiding certain high-rate loans; and (4) valuation - despite ongoing underperformance, LC still trades at a significant premium to tech peers. As part of this report, we have provided in-depth analysis of the company's 3Q15 underlying loan data, which reveals continued declines in interest rates, increasing average loan balances and borrower debt loads, and declining income verification."

For an analyst ratings summary and ratings history on Lending Club click here. For more ratings news on Lending Club click here.

Shares of Lending Club closed at $13.62 yesterday.

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