Lending Club shares target raised on strong Q2 results

On Wednesday, Piper Sandler showed a positive stance on Lending Club (NYSE:LC), raising the stock’s price target to $13 from $10, while sustaining an Overweight rating. The adjustment follows Lending Club’s second-quarter earnings release, which surpassed expectations largely due to an uptick in marketplace revenue.

Lending Club’s second-quarter performance was robust, with earnings outpacing both analyst estimates and the company’s own projections. This success was attributed to a significant rise in marketplace revenue. Although the projected Profit and Loss Revenue (PPNR) for the upcoming quarter is set at $40-50 million—a slight decrease from the $55 million of the second quarter—it still represents an increase from the earlier guidance of $30-40 million.

In addition to its financial achievements, Lending Club has also revised its loan origination forecast upward, from $1.8 billion to a range of $1.8-1.9 billion. This revision is based on the expansion of new initiatives and a modest improvement in loan pricing.

Management highlighted that the price on sold loan volume has climbed by approximately 20 basis points, which is a positive development, even though it remains over 300 basis points lower than it was three years ago. This indicates that there is considerable potential for pricing to normalize in the future.

Piper Sandler expressed confidence in Lending Club’s strategic growth, particularly noting that the management’s prudent approach to expanding the company’s balance sheet should lead to significant earnings growth as the year 2024 concludes. Looking forward, this strategy is anticipated to drive substantial earnings expansion for Lending Club in 2025.

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