What happened
Open Lending (LPRO 0.69%) had an excellent week, as its stock was up 29% as of 1 p.m. ET Friday, according to S&P Global Market Intelligence. The auto loan specialist's stock was trading at about $9.45 per share, gaining roughly 40% year to date.
So what
Open Lending, founded in 2000, offers automated lending services to financial institutions that provide auto loans. It specializes in loan analytics, risk-based pricing, risk modeling, and automated decision technology.
The catalyst for this week's surge higher was solid first-quarter earnings that handily topped analysts' projections.
NASDAQ: LPRO
Key Data Points
However, the numbers were not pretty compared to a year ago. Loans were down 26%, while revenue fell 23% to $38.4 million. Net income was off 46% to $12.5 million, and adjusted EBITDA dropped 37% to $21.2 million. The decline reflects a slowdown in auto lending compared to a year ago due to higher interest rates and economic headwinds.
"In this challenging economic environment, we remain laser focused on further refining and optimizing our sales channels, enhancing our technology offering and attracting and retaining top talent. We feel that the challenges our industry faces will eventually subside and that we are well positioned to capture the pent-up demand when conditions improve," CEO Keith Jezek said.
Now what
The better-than-expected numbers in Q1 helped buoy Open Lending, but times remain challenging. In its second-quarter guidance, Open Lending called for revenue of $33 million to $37 million and adjusted EBITDA of $16 million to $20 million, both of which are below the Q1 figures. The outlook for certified loans was 29,000 to 33,000 -- in line with the first quarter's 32,408 loans.
Morgan Stanley raised Open Lending's price target from $5 to $6 per share, a level more than 30% below its current price.
Better days may be ahead for Open Lending, but we may not see those days for a few quarters due to expected economic headwinds. The stock had a nice run-up this week, but it is a little overpriced right now, with a forward price-to-earnings ratio of almost 21.
