By:
Ryan Dahlen, 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.
• LendingTree, Inc. (Ticker: TREE) engages in the operation of online
loan marketplace for consumers seeking loans and other credit-based offerings.
It provides mortgage loans, home equity, reverse mortgage, auto loans, credit
cards, personal loans, student loans, and small business loans. The company was
founded Douglas Lebda in April 2008 and is headquartered in Charlotte, NC.
• LendingTree is one of
the nation’s leading online insurance marketplaces.
•Although, LendingTree
had another terrific year, TREE finished Q4 with a non-GAAP EPS of $1.22,
missing earning by $0.25.
• Record revenue from
non-mortgage products of $156.2 million in the fourth quarter represents an
increase of 67% over the fourth quarter 2017 and accounted for 77% of total
revenue.
• Mortgage revenue of
$46.5 million declined 31% compared to the fourth quarter 2017, driven by a
decline in refinance revenue.
Key
points:
LendingTree remains strong with its estimates for
2019, with their revenues estimated between, $1,010- $1,045 million
representing growth of 32%-37% over 2018. Variable Marketing Margin is expected
to be in the range of $385 - $400 million, up from prior range of $365 - $385
million. Adjusted EBITDA is now anticipated to be in the range of $205 - $215
million, up from prior range of $195 - $205 million, and representing growth of
34% - 40% over 2018.
Since the new year, the
FED has announced that the interest rates will not rise soon and with the drop-in
expectations of rates, combined with reduced capacity and competition for
LendingTree provides a bit of external stimulus to lender profitability. The
company is optimistic that this will help them return to sequential growth in
their mortgage segment.
As for the company’s
credit card business across the My LendingTree platform, there are tremendous
opportunities. Although, still in the early stages with revenues less than $1
million, the company has already generated $600,000 in January and are
confident that their efforts will provide sustained growth throughout 2019.
The company is seeing a
40% year-over-year increase in direct-to-site loan requests, a 43% life in
branded SEM loan requests, and a 17% increase in loan requests in SEO channels.
LendingTree is making every effort to make sure their goals are hit, launching
several TV spots focusing on a variety of different loan and credit products.
The acquisition of
ValuePenguin, who’s business was 80% insurance, LendingTree is confident that
QuoteWizard clients will benefit from the high-quality content. The company is hoping that ValuePenguin acts
as a catalyst for QuoteWizard in the marketplace with carriers and agents in
order to increase their revenues.
What
has the stock done lately?
Over the past three
months, LendingTree has seen their stock increase 56% while the Russell 2000
only saw a 13% increase. A major catalysis for the stock price was the
complement of the company’s acquisition of ValuePenguin as well as exercising
the option to acquire Dubond Infotech Services, LLP for $449k.
Past
Year Performance:
TREE has increased 15% in value over the
past year while the Russell 2000 has seen 3% increase. LendingTree has a P/B
multiple that has increased from ~8x to 13.58x while their PE multiple is at
53.6x according to FactSet.
Source: FactSet
My
Takeaway:
LendingTree has made
acquisitions and has proven successful over the past months. With continued
focus on developing their platform and fulfilling their acquisitions, the
company is in strong financial state and is positioned very well to benefit in
the future. FinTech remains an attractive investment theme for the remainder of 2019 and beyond.
Source: FactSet
