Shares of LendingClub Corp. were on pace for their biggest percentage drop in nearly a year on Thursday, as investors and analysts grew more concerned about the cautious outlook the online lending platform gave a day earlier.
Among the analyst firms that tempered their expectations were Janney Montgomery Scott, which on Thursday downgraded the stock to neutral from buy. Wedbush, meanwhile, cut its 2023 earnings-per-share estimates for LendingClub
The sell-off came after LendingClub on Wednesday did not issue any specific financial forecast beyond the first quarter of this year, as rising interest rates hit loan demand and underwriting practices tighten up. For 2023 overall, LendingClub executives would only say that the company “intends to remain profitable.”
“Given the broader macroeconomic uncertainty, we are moving to quarterly guidance,” Chief Financial Officer Drew LaBenne said on Lending Club’s earnings call on Wednesday.
Shares of LendingClub sank 13% on Thursday. The trading action put the stock on pace for its biggest percentage decrease since Jan. 27, 2022, when it plunged 29.2%, according to FactSet data.
Wedbush analysts said they now expected LendingClub to earn 40 cents a share for 2023, down from $1.30, citing “higher credit costs and lower fee income.”
LendingClub this month said it would lay off 225 employees, or 14% of its staff. The cuts were made after “reduced marketplace revenue following the Federal Reserve’s historic pace of interest-rate increases,” executives said then.
LendingClub helps people find lower-cost loans. The company gets revenue from origination fees from borrowers, as well as servicing fees on loans sold to investors. Most of its members use the platform to consolidate credit-card debt. LendingClub in 2021 acquired the digital bank Radius Bancorp, which broadened its banking services and put some loans on its balance sheet.
The company on Wendesday reported fourth-quarter results that beat expectations. For the first quarter, executives said they expected loan originations of $1.9 billion to $2.2 billion, with pre-provision net revenue of $55 million to $70 million. During the analysts call management said it needed to be “selective on credit,” as more financial institutions set aside more money to guard themselves against souring loans.
“We had thought that marketplace revenue would trough in 1Q:23 as the Fed started to slow down/stop the rate-hike cycle and that the bank would continue to grow even if a greater proportion of originations were held for investment as opposed to being sold in the marketplace,” Janney Montgomery Scott analyst John Rowan said in a research note on Thursday.
“The message we heard last night was starkly more conservative, as management is going to grow only the bank balance sheet as the holding company generates retained earnings,” he continued.
LendingClub stock is down some 60% over the past 12 months. By comparison, the S&P 500 Index
has fallen 7% over that period.