Last Update 04 Feb 26

LDI: Future Returns Will Depend On Credit Risk And Loan Growth

Analysts have trimmed their price target on loanDepot to US$2.40 from US$3.00, citing macro and credit concerns around regional lenders, while also pointing to factors such as loan growth, net interest income trends, operating leverage and returns as key drivers for their updated view.

Analyst Commentary

Goldman Sachs adjusted its view on loanDepot with a lower price target, but the research also highlights potential drivers that could shape how the market values the stock over the next few years.

Bullish Takeaways

Analysts highlight the potential for solid loan growth in 2026, which, if achieved, could support higher revenue and help justify stronger earnings power over time.
Positive momentum in net interest income is seen as a possible support for improved profitability, which could help the company better cover its cost base and support its valuation.
Expectations for positive operating leverage suggest that if revenue holds up or improves, expenses may grow more slowly, which can lift margins and support better returns on equity.
Improving returns over a multi year period are cited as a key reason some investors may still see room for fundamental improvement despite the lower price target.

Bearish Takeaways

The cut in the price target to US$2.40 from US$3 signals that some analysts see less upside relative to prior expectations, reflecting a more cautious stance on valuation.
Regional lenders underperformed the market by 200 to 300 basis points in 2025, and that weaker relative performance frames loanDepot within a peer group that has faced pressure.
Macro concerns and credit worries around regional lenders remain a key overhang, with credit risk described as the main wildcard that could affect earnings quality and capital needs.
The presence of a Sell rating from Goldman Sachs underscores that, despite potential for multi year fundamental improvement, some analysts are wary about execution risks and the timing of any payoff for shareholders.

Valuation Changes

Fair Value: The fair value estimate remains unchanged at US$2.38, indicating no shift in the core valuation output.
Discount Rate: The discount rate stays at 12.5%, so the required return assumption used in the model is consistent with the prior estimate.
Revenue Growth: Revenue growth expectations are slightly lower, moving from 19.75% to 19.57%. This reflects a modestly more cautious outlook on top line expansion.
Net Profit Margin: The assumed net profit margin is slightly higher, moving from 3.93% to 3.95%. This points to a marginally stronger profitability assumption.
Future P/E: The future P/E multiple is effectively unchanged at about 12.54x. This suggests the valuation model is applying the same earnings multiple as before.

Overly optimistic expectations for sustained growth overlook challenges posed by slowing household formation, affordability issues, and heightened competition from agile fintech rivals.
Ongoing exposure to interest rate cycles and persistent legacy costs threaten profitability, while limited brand differentiation and pricing pressure may restrict market share gains.
Strategic investments in technology, diversified origination channels, and expansion into new segments position loanDepot for scalable growth, stable income, and improved competitive resilience.

Catalysts

About loanDepot

Engages in originating, financing, selling, and servicing residential mortgage loans in the United States.What are the underlying business or industry changes driving this perspective?

Investors appear to be pricing in overly optimistic expectations of sustained high mortgage demand from Millennials and Gen Z, but demographic trends suggest U.S. household formation is slowing and affordability challenges are likely to weigh on mortgage originations, potentially constraining long-term revenue growth.
The market seems to be extrapolating near-term volume improvements as a sign that loanDepot can drive consistent profitability, while the company remains structurally exposed to interest rate cycles and cyclical mortgage origination revenues, which could result in continued earnings volatility and unpredictable net margins.
Enthusiasm for loanDepot's technology initiatives and leadership hires may be overestimating how fast digital transformation will translate into margin expansion, as legacy cost structures and competition from more agile fintech disruptors could limit improvements in efficiency and profitability.
Expectations for market share gains assume consolidation will favor loanDepot, but the accelerating entry of alternative lenders and non-traditional credit providers puts sustained top-line growth at risk by diluting the company's competitive advantage in the digital lending space.
The company's focus on scaling direct lending and capturing refinance volume if rates decline is seen as a growth lever, yet persistent high rates, industry pricing pressure, and limited brand differentiation may hinder both origination growth and gain-on-sale margins, negatively affecting both revenue and net income.

loanDepot Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming loanDepot's revenue will grow by 16.4% annually over the next 3 years.
Analysts assume that profit margins will increase from -6.0% today to 4.5% in 3 years time.
Analysts expect earnings to reach $80.2 million (and earnings per share of $0.15) by about September 2028, up from $-67.1 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.6x on those 2028 earnings, up from -6.4x today. This future PE is lower than the current PE for the US Diversified Financial industry at 16.4x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report.

loanDepot Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

loanDepot's investments in digital transformation-including hiring experienced technology leaders and focusing on AI-driven operating efficiency-align with the long-term industry shift toward digital mortgages, creating opportunities for improved process efficiencies and lower origination costs, which could favorably impact net margins and earnings over time.
The company's direct lending, technology-powered origination platform, and nationally recognized brand enable rapid scaling during refinancing booms or purchase market rallies, allowing loanDepot to capture increased origination volumes and boost revenue when market conditions become favorable (e.g., lower interest rates).
loanDepot's significant servicing portfolio provides a stable and recurring source of fee income, which, when paired with dynamic hedging strategies, can protect against short-term rate volatility and support more consistent earnings and cash flow.
Expansion into underpenetrated market segments-such as refinances and second mortgages-positions loanDepot to grow market share, especially given management's track record of scaling profitably during both down and up cycles, potentially supporting long-term revenue growth and operating leverage.
Ongoing industry consolidation and the company's multichannel origination strategy, along with strategic partnerships in stable sectors like homebuilder joint ventures, strengthen loanDepot's competitive position and could result in sustainable market share gains, supporting future top-line revenue and margin resilience.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $1.617 for loanDepot based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $1.9, and the most bearish reporting a price target of just $1.45.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.8 billion, earnings will come to $80.2 million, and it would be trading on a PE ratio of 11.6x, assuming you use a discount rate of 12.3%.
Given the current share price of $2.04, the analyst price target of $1.62 is 26.2% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

Have other thoughts on loanDepot?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Cost Controls And Executive Changes Will Shape Mortgage Lending Amid Headwinds