Here's Why You Should Hold on to LendingTree (TREE) for Now
LendingTree, Inc. TREE efforts to increase non-mortgage product offerings will aid revenue growth. A flexible business model and diversified solutions for a wider array of lenders are expected to aid the Home segment amid a high interest rate environment.
However, elevated costs on technology and advertisement expenses are likely to hurt its financials. A decline in the Insurance segment’s revenues will impede the top line.
LendingTree is committed to boosting revenues by diversifying its non-mortgage product offerings, particularly in the Consumer segment. Over the past years, the company has increased its services, such as credit cards, and widened loan offerings to personal, auto, small business and student loans. The Consumer segment’s revenues witnessed a compound annual growth rate (CAGR) of 3.3% over the last three years (ended 2023).
LendingTree’s initiatives, including SPRING (previously MyLendingTree) and TreeQual, are likely to improve cross-selling opportunities with existing customers, thus, driving profitability.
The company is focusing on improving purchase conversion rates, while assisting in meeting customer demand for home equity loans. Also, LendingTree’s market-leading position and flexible business model, which provides more diversified solutions for a wider array of lenders, will enable it to navigate through fluctuating macroeconomic situations and a high-interest-rate environment.
LendingTree’s bottom line has benefited from its acquisition spree. Since 2016, the company has completed a number of deals for more than $1 billion, including potential earnouts. Over the past few years, the company has enhanced its credit services and credit card product offerings, along with strengthening its online lending platform through acquisitions.
However, LendingTree’s revenues in the Insurance segment have declined, seeing a CAGR of 3.2% over the past four years (ended 2023). Given the weakness in personal auto loans, reduced marketing spends by partners and overall worsening operating backdrop, the company expects subdued demand.
LendingTree’s cost base has declined, seeing a four-year (2019-2023) CAGR of 6.1% on cost-containment efforts in 2023, including headcount reduction and the elimination of low-returning businesses. Although such initiatives may help it navigate the challenging macroeconomic scenario, the normalization of business activities will likely increase technology and advertisement expenses. This might affect bottom-line growth in the long term.
With limited cash levels, an inconsistent quarterly performance and a high debt/equity ratio, the company’s capital distribution activities seem unsustainable in the days to come.
Over the past six months, TREE shares have jumped 156.3% against the industry’s decline of 34.5%.
Image Source: Zacks Investment Research
Currently, TREE carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Finance Stocks Worth Considering
A couple of better-ranked stocks from the finance space are Federal Agricultural Mortgage AGM and Ocwen Financial OCN.
Federal Agricultural’scurrent-year earnings estimates have been revised 3.3% upward over the past 30 days. Its shares have gained 17.1% over the past six months. The company currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Ocwen Financial’scurrent-year earnings has been revised marginally upward over the past month. Over the past six months, its share price has declined 9.5%. The company currently carries a Zacks Rank of 2.
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Ocwen Financial Corporation (OCN) : Free Stock Analysis Report
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