Guggenheim upgraded LendingClub Corp LC to Buy, which is only the fourth positive rating for the stock in the last 12 months. However, the situation may change as improving funding should drive reaccelerating origination and EPS growth.
Analyst Eric Wasserstrom highlighted the following five reasons for his upgrade:
1) “LC's bank funding channel has returned to levels prior to its May 2016 internal control failures, which we believe underscores the durability of this funding source; our concern about risk to this channel motivated our downgrade last May.”
2) “Similarly, we believe LC's efforts to create a securitization platform will also support its medium term growth objectives.”
3) “Based on the remediation made to its funding structure and internal controls, we now have an improved view of LC across the four pillars we consider critical to the success of any lending model.”
4) “In the near term, we believe LC will demonstrate reaccelerating origination growth and profitability beginning in 2H17, we see longer term adj. earnings power above $0.60 (fully taxed).”
5) “We believe risk/reward is compelling, as the stabilization in the bank channel dramatically reduces tail risk with significant upside potential to our $7 price target; we believe longer term valuation could converge to $9.”
Meanwhile, the other three Buy ratings for the stock are from Morgan Stanley, BTIG and Craig Hallum.
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