Funding Circle Shares: Analysts Sees Further Upside Despite 79% YTD Rise

Cavendish initiated coverage of Funding Circle (LON: FCH) with a Buy rating and 275p target price in a note on Monday, arguing the market does not fully reflect the quality or medium-term earnings potential of the UK small-business lending platform.

The bullish rating and price target come despite a 79.5% rise for the stock so far this year.

Analyst Rahim Karim said Funding Circle “has transitioned from a peer-to-peer lender into a predominantly capital-light origination, servicing and technology business.”

Following the sale of its US operations and exit from retail peer-to-peer funding, the group is now focused on a streamlined UK franchise funded largely by institutional capital rather than its own balance sheet.

Karim described the company’s technology as “a core differentiator, rather than simply a distribution tool,” underpinned by more than 15 years of lending experience and about 10 billion proprietary data points supporting AI-led credit decisions. The firm believes the scale of the dataset and operating history “create a barrier to replication.”

On the financials, Cavendish forecasts revenue rising from £204m in fiscal 2025 to £350m by fiscal 2029, with adjusted pre-tax profit climbing from £20.3m to £84.4m and margins expanding to 24.1%. It said this leaves the group well positioned to deliver toward the top end of its medium-term guidance while maintaining shareholder returns through buybacks and dividends.

Cavendish values Funding Circle on a sum-of-the-parts basis, applying a discounted cash flow to the Term Loans business and valuing FlexiPay at book value, arriving at its 275p target “with upside potential” as the term business scales and FlexiPay moves into profitability.