LendingTree, Inc.’s TREE initiatives to strengthen SPRING and TreeQual platforms will improve cross-selling opportunities. Moreover, its focus on non-mortgage product offerings will aid revenue growth. Yet, rising costs will impede the bottom line. Any decline in the Insurance segment’s revenues will affect the total revenues. With a weak liquidity position, its capital distribution activities seem unsustainable.
LendingTree is committed to boosting revenues by diversifying its non-mortgage product offerings, particularly in the Consumer segment. Given the volatility in the mortgage space, this seems like a strategic fit. The Consumer segment’s revenues witnessed a compound annual growth rate (CAGR) of 3.3% over the last three years (ended 2023), while the trend reversed in first-quarter 2024 due to limited credit availability.
Also, the company’s Home segment’s revenues (consisting of Home Equity revenues and mortgage revenues) saw a CAGR of 1.4% over the last three years (ending 2022). The trend reversed in 2023 and first-quarter 2024 due to muted purchase markets and lower demand due to higher rates. Nonetheless, LendingTree is focusing on improving purchase conversion rates, while assisting in meeting its customers’ demands for home equity loans.
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 high interest-rate environments.
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. In first-quarter 2022, it acquired an equity interest in EarnUp, a consumer-facing payments platform, for $15 million. Therefore, strategic initiatives will likely support bottom-line growth further.
However, LendingTree’s revenues in the Insurance segment have declined, seeing a CAGR of 3.2% over the past four years (ended 2023), with the trend reversing in first-quarter 2024. Any weakness in personal auto loans and reduced marketing spends by partners will keep demand subdued.
LendingTree’s cost base has declined, seeing a four-year (2019-2023) CAGR of 6.1%, with the trend continuing in first-quarter 2024. This was backed by cost-containment efforts, 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 in the upcoming quarters will likely increase technology and advertisement expenses. This might affect bottom-line growth in the long term.
As of Mar 31, 2024, LendingTree’s cash and cash equivalents were $230.7 million, while the long-term debt was $631.3 million. With limited cash levels, inconsistent quarterly performance and a high debt/equity ratio, the company’s capital distribution activities seem unsustainable in the days to come. As of the first-quarter 2024 end, it had $96.7 million of the remaining authorization.
Over the past six months, TREE shares have jumped 221.9% compared with the industry’s rise of 15.9%.
Image Source: Zacks Investment Research
Currently, TREE carries a Zacks Rank #3 (Hold).
Finance Stocks Worth Considering
A couple of better-ranked stocks from the finance space are Velocity Financial VEL and Fidus Investment FDUS.
Velocity Financial’s current-year earnings estimates have been unrevised over the past 30 days. Its shares have gained 34.4% over the past six months. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Fidus Investment’s current-year earnings has been unrevised over the past month. Over the past six months, its share price has increased 2.8%. The company currently carries a Zacks Rank of 2 (Buy).
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LendingTree, Inc. (TREE) : Free Stock Analysis Report
Fidus Investment Corporation (FDUS) : Free Stock Analysis Report
Velocity Financial, Inc. (VEL) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
