By: John Wagner, AIM student at Marquette
University
Disclosure: The AIM Equity
Fund currently holds this position. This article was written by myself, and it
expresses my own opinions. I am not receiving compensation for it and I have no
business relationship with any company whose stock is mentioned in this
article.
Summary
•
LendingTree, Inc. (NASDAQ:TREE) is
the leading online loan marketplace connecting consumers to over 450 lenders that offer
student, personal, mortgage, automobile and other related types of loans.
•
TREE is continuously developing their MyLendingTree platform and investing in
technology to conquer the digital gap in the mortgage industry, while working
with lenders to provide consumers with training, information, and a better
overall customer experience.
•
LendingTree has diversified their
mortgage/non-mortgage revenue mix to about 45%/55% v. 65%/35% just two years
ago. This diversification should continue to contribute to their 5-yr revenue
CAGR of 41%.
•
With a TAM worth over $19 billion and only a 30% market share, TREE looks to
continue expansion through acquisitions and development of non-mortgage
segments.
Key points: Lending Tree is back on track following its
spin out in 2008. Following their decline, large amounts of M&A and
internal development has occurred, creating over 50% growth since 2015. Management
has placed emphasis on not only diversified product portfolio but conforming to
needs of millennials, who are growing faster vs. peers. These millennials, who
are technology dependent, will make use of all TREE has to offer, not only loan
related, but also for filing taxes.
In
it’s most recent M&A deal, LendingTree acquired Roostify, a leader in the real
estate lending marketplace. Nikul Patel, Chief Strategy Officer of TREE,
proposed that this acquisition will not only make matching lenders with
consumers more seamless, but allows for loans to be completely digital in this
segment of their business. Combining these two platforms allows for loans to be
found, filed, and closed completely digitally. In essence, this new acquisition
will diversify their product portfolio as well as make loans simple, paperless,
and fitting for millions of people, especially millennials.
With
that being said, it will be interesting to see how management reacts to the
current mortgage industry, and home sales specifically. According to the
National Association of Realtors, the number of homes on the market have hit an
all time low, meaning consumer mortgage demand could be adversely impacted.
Management claims that in their current product portfolio, a decline in
purchase demand will be recouped with refinancing; that they are not worried
about the current state of the mortgage industry.
Also
to note, Purcell Julie & Lefkowitz LLP, a law firm committed to
representing shareholders , has launched an investigation against LendingTree,
Inc. for its potential breach of fiduciary duty. Pending results of the
investigation, shareholder wealth could be largely impacted if it is found that
TREE did not reach their fiduciary responsibility. There has been no more
information released to this point.
What has the stock done
lately?
The
stock has just recently dropped ~10% from it’s 52 week high, $404.40, to now
$362.25. This dip occurred on January 23rd
primarily as a result of overnight trading volatility. Since this
dip, TREE is up 2.3%, to a current price of $370.60. 4Q-17 earnings are to be
released February 22.
Past Year Performance: Following four major acquisitions in 2017,
as well as continuous development to its MyLendingTree app and platform,
LendingTree, Inc.’s stock is up 227% this year. TREE has also hit its all time
high stock price of about ~$404, however, it is now currently trading around
$362. While TREE has beat consensus estimates twice in 2017, 4Q earnings could
be very indicative of their position in the current market.
My Takeaway
Management
is a key factor in the continued success of LendingTree, Inc. Founder,
Chairman, and CEO Doug Lebda has been with TREE since its IPO in 2000. After a
series of ups and downs, it has ultimately prevailed on top. With continued
technological development and expansion across both its mortgage and
non-mortgage segments, there is potential for the stock to continue its incline.
While issues arise regarding home sales, polls note 67% of people (79% of
millennials) are optimistic about their personal financing improving this
coming year. With millennials continuing to apply for school loans, technological
upgrades, and continued expansion in non-mortgage segments, TREE has could have
a bright future. However, pending the results of its current lawsuit and
outlook on its mortgage segment, I am recommending a hold rating for
LendingTree, Inc.
