On Friday, Needham maintained a Buy rating on Lending Tree (NASDAQ: TREE) stock and increased the price target to $67 from $56, following the company's second-quarter financial results.
The online lending exchange's performance exceeded expectations, particularly in terms of revenue, which was bolstered by a significant upturn in insurance revenue. This improvement was attributed to a resurgence in carrier demand for leads after an extended period of decline.
According to Needham, the company's Value of Mortgage Marketing (VMM)/EBITDA was slightly below projections, but this was mainly due to customer acquisition costs (CAC) normalizing alongside improved customer traffic, rather than indicating a more permanent shift in the business model. The firm has adjusted its estimates upward in light of the recent results.
The analysis suggests that Lending Tree could benefit from potential interest rate reductions by the Federal Reserve later in the year or in the fiscal year 2025. These changes could positively impact TREE's various non-insurance verticals, including mortgage and personal loans.
Needham's outlook on Lending Tree remains positive, with the expectation that the stock will open at an enterprise value (EV) to EBITDA multiple of approximately 9.5 times the firm's fiscal year 2025 estimate.
Needham's stance reflects a belief in the favorable risk-reward profile for Lending Tree shares, given the company's improving fundamentals. The firm's endorsement and price target adjustment come in the wake of the company's reported success in the second quarter of 2024, signaling confidence in Lending Tree's growth trajectory.
In other recent news, LendingTree, Inc. reported robust growth in its second quarter of 2024, particularly in its insurance business, which saw revenues more than double compared to the same quarter the previous year.
The company's insurance segment revenue soared by 109%, with VMD growth of 47% year-over-year, and it expects this upward trend to continue into the third quarter. Despite a recent data breach at its subsidiary QuoteWizard, LendingTree reassures stakeholders of minimal impact on its operations.
The company has welcomed Jason Bengel as the new CFO, succeeding Trent Ziegler. LendingTree is strategically focused on generating positive incremental variable margin dollars and capturing high-intent consumers, aiming to replicate its success in the insurance sector within the lending space. As the Federal Reserve contemplates a rate cut, LendingTree remains optimistic about its potential benefits to the mortgage business and overall financial performance.
These are all recent developments, and the company is optimistic about the lending sector's growth once interest rates decline. LendingTree forecasts continued revenue growth into the third quarter of 2024 and aims to increase market share in both lending and insurance sectors. The company also plans to leverage marketplaces to enhance business growth and compete with larger industry players.
InvestingPro Insights
As Lending Tree (NASDAQ: TREE) navigates through a dynamic financial landscape, real-time insights from InvestingPro provide a deeper look into the company's performance and market position. With a market capitalization of $723.65 million, Lending Tree's stock trades with notable price volatility, a characteristic that investors should be mindful of. Despite recent challenges, analysts have revised their earnings upwards for the upcoming period, reflecting a sense of optimism about the company's potential to grow its net income this year.
InvestingPro data highlights a significant price rally, with a 36.83% total return over the last month and an impressive 94.53% over the last year. This performance is aligned with the positive outlook shared by Needham, suggesting that the company's shares may continue to attract investor interest. Furthermore, with liquid assets exceeding short-term obligations, Lending Tree demonstrates financial resilience, which could be a reassuring factor for investors considering the company's stock. For those looking to delve deeper into Lending Tree's prospects, InvestingPro offers additional tips and insights on the company. Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and discover why analysts predict profitability for Lending Tree this year among 14 additional InvestingPro Tips.
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