FBR & Co. analyst Bob Ramsey thinks a shift in business strategywill push sustainable profitability further into the future for , and he downgradedthe company to "market perform" from "outperform" in a May 3note.
Diminished loan demand and tighter underwriting standards havemeant slower origination growth, Ramsey said.
Buyers of loans for securitization left the market in 2016, andthey paid the most for loans, the analyst wrote. OnDeck now plans to keep up to85% of its originations on its balance sheet rather than sell more, as was previousguidance. That change should result in greater returns on the assets, "butthe timing of revenues and earnings gets pushed out given up-front provision expenseand revenues earned over the life off the loan," Ramsey said.
The company cut its 2016 guidance for revenue and adjusted EBITDA,and Ramsey adjusted downward his 2017 expectation for earnings.
He cut his price target for OnDeck to $6.50 from $11.00. He decreasedhis operating EPS estimate for 2016 to a loss of 70 cents per share from a lossof 5 cents per share, and for 2017 to breakeven from EPS of 25 cents.