On Friday, Piper Sandler analyst Brad Capuzzi increased the price target on Lending Club stock (NYSE:LC) to $20.00 from $15.00, while maintaining an Overweight rating. The revision follows the inclusion of Lending Club as a top pick for the year 2025 in Piper Sandler's "2025 Financial Services Top Ideas."
Capuzzi's updated assessment comes with a maintained fourth quarter 2024 estimated operating EPS of $0.09, and a raised full-year 2025 estimated operating EPS to $0.90 from $0.88. Additionally, the full-year 2026 estimated operating EPS has been increased to $1.35 from $1.32. The adjustments account for better loan sale pricing observed in the third quarter of 2024, as bank buyers began to re-engage with Lending Club.
Despite the recent improvement, loan sale prices remain below Lending Club's historical average, suggesting potential for further upside. The new price target is based on applying a core earnings multiple to the forecasted FY26 earnings, with adjustments made for normalizing provisions to 370 basis points, down from 390 basis points, reflecting improving credit performance. The required return assumption has also been reduced to 10% from 10.5%, in light of an improving earnings outlook. Additionally, estimated excess capital has been added back in the valuation.
The analyst's optimism is underpinned by Lending Club's performance in the third quarter of 2024, where it saw an uptick in loan sale prices as a result of increased engagement from bank buyers. This engagement is a sign of recovery, although there is room for growth since prices have not yet reached the company's historical average levels.
Piper Sandler's price target adjustment for Lending Club reflects a positive outlook for the company's financial performance over the next few years. The firm's analysis incorporates an improved earnings forecast and a favorable assessment of the company's credit performance and capital position.
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