OnDeck Capital Inc.ONDK -0.16% has been public for less than one month, but one analyst has already rated the small-loan lender twice – and it’s not because he’s become more enamored of the name.

Last week Sterne Agee analyst Henry Coffey weighed in on OnDeck Capital, one of a crop of alternative lenders that have gone public in the past several months. On Jan. 8, Mr. Coffey gave OnDeck a neutral rating and a $20 price target.

On Monday, Mr. Coffey cut his rating to underperform and slashed the company’s price target to $15.75. That would value the company at about 26 times Sterne Agee’s 2016 adjusted earnings estimate; that’s half the multiple at which rival online lender Lending Club Corp.LC -5.25% now trades, based on the analyst consensus, according to FactSet.

OnDeck has sought to be labeled by investors as a high-growth technology company with a platform to link small business borrowers and lenders. During its IPO roadshow, the company sought to pitch its stock to tech investors rather than to financial analysts, a person familiar with the pitch said. Instead, Mr. Coffey said he and his team have come to the conclusion that it should be considered a high-growth specialty finance lender.

When looking at OnDeck as a finance company, he wrote, investors will be looking at the quality of its loans and borrowers, competition, and potentially regulatory issues, rather than the growth in loan origination and revenue. Mr. Coffey expects to see “considerable growth in both loan originations and revenue,” but he said that’s not enough.

Meanwhile, the money moving into this space will inevitably cause regulators to take a closer look at alternative lenders, which could crimp their growth.

“In some ways, the rapidly growing marketplace lending and P2P business reminds us of the U.S. prepaid card business five years ago,” Mr. Coffey writes, citing Green Dot Corp. and NetSpend, now owned by Total System Services. Both companies, initially outside the purview of banking and consumer regulators, quickly came under their scrutiny, which caused their growth to slow and profit margins to compress.

Mr. Coffey thinks that OnDeck, Lending Club Corp. (which went public in December a week before OnDeck) and other entrants into the peer-to-peer and alternative lending space could potentially suffer a similar fate.

While investors were giddy over the potential of the sector a month ago, it has already lost some of its luster for investors. OnDeck’s shares dropped nearly 9% on Monday. Its stock has been sliding since its second day of trading after popping 40% on its first day. After Monday’s slide, OnDeck’s shares are just 3% above the company’s IPO price.

Meanwhile, Lending Club’s shares are trading around $21 a share, up 40% from its IPO price, but down 24% from its post-IPO high.