A February 3rd report from BTIG Equity Research highlights that peer-to-peer loan firm LendingClub recently signed deals with both Google and Alibaba as it continues its strong growth. The report also points out that the new Alibaba deal is another step for LendingClub in diversifying its loan portfolio and growing beyond consumer lending into the small business loan arena.
BTIG’s price target of $31 for LendingClub shares is based on 0.8X the company’s fiscal year 2016 total loan originations of $13.7 billion discounted at 10%.
The company just went public a couple of months ago, and has slipped more than 10% from its IPO price to date.
More on LendingClub – Alibaba deal
As discussed by ValueWalk, under the new deal with Chinese ecommerce giant Alibaba, LendingClub will become the main source of the financing for U.S. buyers on Alibaba.com. LC will offer loans of $5000 up to $300,000 to pay for goods or services from Chinese suppliers using Alibaba’s trading platform.
The new service, “Alibaba.com e-Credit Line, Powered by LendingClub”, will offer financing over one to six months at rates of 0.5% to 2.4%, far below the interest rates that credit cards charge. Of note, LendingClub’s business model involves matching up borrowers and lenders for a fee, and the firm does not lend money itself.
LendingClub set for rapid growth
BTIG analysts Mark Palmer and Guiliano Bologna say they “believe LendingClub’s partnership with Alibaba coming on the heels of the announcement of the company’s deal with Google, provides yet another demonstration of the firm’s potential reach and growth prospects within the small business lending space.”
They also note that at the time of the Google deal, small business lending only represented about 2% of LendingClub’s loan originations, but that is likely to change quickly after inking these two new deals. In closing, Palmer and Bologna comment that most investors do not yet appreciate the growth potential of the different verticals where LendingClub could apply its high-margin business model.