On Friday, Maxim Group adjusted its outlook on Lending Club (NYSE:LC) shares, raising the price target to $19.00 from the previous $16.00, while reaffirming its Buy rating on the stock. The adjustment came after Lending Club hosted an investor event in New York City, following its third-quarter earnings report.
Lending Club's third-quarter performance fell short of expectations, with net revenue significantly below consensus, projections, and prior guidance, leading to a 30% drop in share value on Thursday. Despite this, Maxim Group remains optimistic due to the company's current share valuation and management's long-term strategy to transform the company into the "AAA of homes," as presented during the investor event.
The company's focus on profitability over net revenue was evident in its adjusted EBITDA, which was closer to expectations. This approach is expected to continue into the fourth quarter, as reflected in the company's revenue outlook.
Lending Club ended the third quarter with $141.5 million in cash, a decrease from $186.3 million in the second quarter. The firm anticipates the repayment of the company's only debt of $34.2 million and expects to generate $20 million from the pending sale of its headquarters in the fourth quarter.
Consequently, Maxim Group has revised its fourth-quarter revenue estimate for Lending Club to $321 million, down from the prior $400 million forecast, and widened the adjusted EBITDA loss prediction to $30 million from $20 million.
For the full year of 2024, the revenue estimate has been lowered to $1,413 million, a 9.5% year-over-year decrease from $1,523 million, and the adjusted EBITDA loss projection has been broadened to $146 million from $137 million.
Looking ahead to 2025, revenue forecasts have been reduced to $1,295 million, an 8.3% year-over-year decrease from $1,598 million, with the adjusted EBITDA loss expected to widen to $35 million from $4 million. Despite these adjustments, Maxim Group maintains its Buy rating, expressing continued confidence in the company's potential for profitability.
In other recent news, Lending Club's third-quarter earnings for 2024 exceeded expectations, leading Piper Sandler to raise the company's stock target price from $13.00 to $15.00, while maintaining an Overweight rating.
The financial services company reported strong results, outperforming estimates largely due to an increase in net interest income and improved loan sale pricing. Lending Club also revised its pretax, pre-provision net revenue guidance upward to a range of $60-70 million, from a previous forecast of $40-50 million.
Despite a predicted seasonal slowdown, Lending Club decided to maintain its origination guidance between $1.8 and $1.9 billion. This decision is attributed to ongoing product innovation and a slight increase in paid marketing efforts. The company also reported a third-quarter improvement in loan sale prices as banks resume purchasing.
In addition, Lending Club reported a 6% sequential increase in originations, reaching $1.9 billion, and an 8% rise in revenue to over $200 million. The company's balance sheet grew by 25% year-to-date to over $11 billion in total assets. These recent developments indicate the company's robust growth and positive future outlook.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Lending Club's financial position and market performance. Despite the challenges highlighted in the article, LC's stock has shown remarkable resilience, with a 166.8% price total return over the past year. This strong performance is further emphasized by significant returns of 30.62% and 72.32% over the last month and six months, respectively.
InvestingPro Tips point out that while LC is quickly burning through cash, a concern mentioned in the article regarding the decrease in cash reserves, analysts anticipate the company will be profitable this year. This aligns with Maxim Group's optimistic outlook on LC's long-term strategy and potential for profitability.
The company's P/E ratio of 27.01 suggests it's trading at a relatively high earnings multiple, which could indicate investor confidence in future growth despite current challenges. However, it's worth noting that LC does not pay a dividend to shareholders, focusing instead on reinvestment and growth strategies.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Lending Club, providing a deeper understanding of the company's financial health and market position.
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