On Deck Has 'More Powerful Future Operating Leverage'

Keefe Bruyette & Woods says On Deck Capital Inc (NYSE: ONDK) sees benefits from marketplace as it provides liquidity and exposure to a different investor group.

"We note that this shift creates an earnings headwind in the near term, but should translate into more powerful future operating leverage," analyst Jefferson Harralson wrote in a note.

On Deck plans to continue selling 15-20 percent of its originations, as it did in the second quarter selling 15.6 percent of originations and Harralson says the company's flexible funding platform enables it to shift toward retaining a higher degree of its originations.

Meanwhile, JPMorgan Chase & Co. (NYSE: JPM) made its first loan utilizing On Deck as a service in April and the analyst expects JPMorgan revenue to start benefiting On Deck in 2017 and 2018.

Meanwhile, the analyst also noted that On Deck's "GROVER" database is helping it create targeted marketing leads, while it gains increased brand recognition from small business owners.

Harralson has a Market Perform rating and $7 target price on the stock, which was recently down 2.91 percent to $6.01.