Oppenheimer has increased its price target on Lending Tree (NASDAQ: TREE) to $65 from $55 while maintaining an Outperform rating.
The firm's analysts cited an accelerating insurance cycle and expected revenue growth in the second half of the year from site conversion initiatives and lower interest rates as the reasons for the adjustment.
Management at Lending Tree has raised its revenue guidance by 21% but decided to keep EBITDA forecasts unchanged. This strategy reflects a focus on capitalizing on high insurance carrier demand at lower-value of Marginal Product (VMM) margins.
It also takes into account the current challenges in the mortgage sector and assumes a minimal impact from potential Federal Reserve rate cuts, which the analyst views as the largest possible source of upside.
The report also highlighted that insurance revenue is projected to continue its growth trajectory into 2025, driven by strong home demand and the approval of premium rate increases in major states like California. Personal loans (PLs) have shown promising growth, increasing by 34% quarter over quarter, benefiting from higher loan consolidation volume and stable credit standards.
LendingTree revenue more than doubled year-over-year in the second quarter of 2024. Financial services firms Stephens and Needham have both raised their price targets for LendingTree, with Stephens citing a 'growth turnaround' and Needham attributing the growth to a rise in insurance revenue. Stephens maintains an Overweight rating, while Needham maintains a Buy rating on the stock.
InvestingPro Insights
Following the positive outlook from Oppenheimer, Lending Tree (NASDAQ: TREE) presents a mixed bag of financial metrics and analyst expectations. According to InvestingPro data, Lending Tree has a market capitalization of $694.29 million, reflecting the market's current valuation of the company. Despite a challenging backdrop, the company's revenue for the last twelve months as of Q2 2024 stood at $667.45 million, although it marked a decline of 18.89% from the previous period. This suggests that while the company has faced headwinds, it still maintains a significant scale of operations.
InvestingPro Tips indicate that Lending Tree's net income is expected to grow this year, aligning with Oppenheimer's anticipation of revenue growth in the latter half of the year. Moreover, the company's strong gross profit margin of 95.11% underscores its ability to maintain profitability at the operational level. However, the P/E ratio is currently negative at -5.41, reflecting investor concerns about profitability over the last twelve months. Analysts predict that the company will turn profitable this year, which could potentially lead to a re-rating of the stock if these expectations materialize.
On the performance front, Lending Tree has experienced a significant price uptick, with a 55.19% return over the last six months and an impressive 116.49% return over the last year. This robust performance may be partially attributed to the company's high shareholder yield and the fact that its liquid assets exceed short-term obligations, providing financial stability and investor confidence.
For readers interested in further insights, there are additional InvestingPro Tips available for Lending Tree, which can be accessed at https://www.investing.com/pro/TREE. To enhance your investment research with these expert tips, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.