OnDeck (ONDK) Stock Continues to Sink. Now What?February 26, 2016 | By: Sean Murray
OnDeck reached another new all-time low share price on Thursday, closing at $6.35 but hitting $6.05 intraday. The continued spanking follows their 2015 earnings release that apparently did not impress the market. And there’s many reasons to be troubled by that since the tone of the earnings call oozed of renewed confidence. It was expressed as much in OnDeck Regains Their Swagger in Q4 Earnings Call – Lends $1.9 Billion in 2015
OnDeck can’t win. When growth was high, critics complained about profitability. When OnDeck achieved profitability, critics complained that growth had slowed. On Wednesday, critics hit them with the kitchen sink. Growth has slowed, losses are mounting, guidance was revised down, the JPMorgan Chase partnership isn’t yielding revenue, operating expenses rose, etc.
The real problem now is that they can’t seem to overcome these objections during a period of economic calm. The stock market is currently operating at rather rational levels. The S&P 500 is only down 3% year-to-date. OnDeck is down 35% over that same time period.
In a recession, financial companies can be uniquely vulnerable to irrational fear. JPMorgan Chase for example, lost more than 50% of their market cap between August 2008 and February 2009. This is a nightmare scenario now for OnDeck.
“These companies have been valued as if there’s really no credit risk or capital-markets risk whatsoever,” said Bill Ryan, an analyst at Portales Partners, to the WSJ. “I think that’s what changed.”
“We are not seeing weakness in our portfolio at this time,” said OnDeck CEO Noah Breslow during the earnings call.
Apparently that doesn’t matter and one has to wonder what will in the future.Last modified: February 26, 2016
Sean Murray is the founder of deBanked, an 11-year veteran of the merchant cash advance industry, a casual Lending Club and Prosper note investor, the co-founder of Daily Funder, an alternative lending speaker, consultant, writer, and enthusiast. Connect with me on LinkedIn or follow me on twitter.