On Friday, Oppenheimer maintained an Outperform rating on shares of Lending Tree (NASDAQ: TREE) and increased the price target to $70 from $65. The adjustment follows Lending Tree’s third-quarter earnings, which revealed EBITDA surpassing consensus estimates by 9%. The company’s Insurance Value Margin Mix (VMM) showed a significant year-over-year acceleration, jumping 30 percentage points to 77%.
The firm’s analyst highlighted the continued up-cycle in the Insurance marketing segment, projecting it to sustain over the next 18 months. This trend is expected to facilitate Lending Tree in generating robust Free Cash Flow (FCF) and aligning its capital structure with the targeted leverage ratio.
Despite a 19% decline in the Consumer segment VMM, the analyst noted that personal loans (PLs), Lending Tree’s highest margin product, are showing signs of stabilization with a 5% year-over-year increase. There is also an anticipation of a recovery in this segment as interest rates begin to decline steadily.
Lending Tree’s financial outlook appears promising according to Oppenheimer’s analysis. The company is expected to generate $80 million in Free Cash Flow for the year 2025. With $97 million in cash reserves and a $50 million undrawn term loan from Apollo, Lending Tree is positioned to comfortably meet its $115 million convertible note maturity in 2025. The price target is anchored on an 11 times multiple of the projected 2025 EBITDA.
The analyst expressed confidence in Lending Tree’s financial strategy and its ability to navigate the market environment effectively. While acknowledging the challenges in the Consumer segment, the emphasis on the company’s strong performance in the Insurance segment and its financial health underpin the positive outlook. The maintained Outperform rating reflects the firm’s belief in Lending Tree’s potential for growth and profitability.
In other recent news, Lending Tree reported robust third-quarter earnings, with total revenue reaching $260.8 million, a 68.0% year-over-year growth. This performance exceeded both Needham and Susquehanna’s estimates. However, the company’s adjusted earnings per share (EPS) for the quarter was reported at $0.80, slightly below Susquehanna’s expectation of $0.85.
Lending Tree’s insurance segment saw a significant 210% year-over-year increase, contributing to the overall growth. However, the company’s EBITDA margin declined to 10%, a drop attributed to allocating 74% of its revenue to marketing efforts.
Needham maintained a Buy rating on Lending Tree, raising the price target to $78 from $67, following these recent developments. The firm highlighted improvements in the company’s value of new mortgage margin (VMM) and earnings before interest, taxes, depreciation, and amortization (EBITDA) in dollar terms.
Conversely, Susquehanna maintained a Neutral rating but increased its price target to $58 from $50. The firm’s valuation of Lending Tree is based on an enterprise value to EBITDA (EV/EBITDA) multiple, leading to a 7.6x EV/EBITDA multiple based on projected 2026 EBITDA of $153.5 million. These are the recent developments in Lending Tree’s financial performance.
InvestingPro Insights
Recent data from InvestingPro adds depth to Oppenheimer’s positive outlook on LendingTree (NASDAQ: TREE). The company’s market capitalization stands at $760.93 million, reflecting its significant presence in the financial technology sector. Despite not being profitable over the last twelve months, InvestingPro Tips indicate that net income is expected to grow this year, aligning with Oppenheimer’s projections for improved financial performance.
LendingTree’s stock has shown remarkable resilience, with a 280.2% price total return over the past year. This impressive performance supports the analyst’s optimistic stance and the increased price target. The company’s price-to-book ratio of 5.22 suggests that investors are willing to pay a premium for LendingTree’s assets, possibly due to its growth potential in the insurance marketing segment highlighted in the report.
InvestingPro Tips also point out that LendingTree’s liquid assets exceed short-term obligations, reinforcing the analyst’s confidence in the company’s ability to meet its upcoming convertible note maturity. This financial stability, combined with the projected Free Cash Flow generation, paints a picture of a company well-positioned for future growth.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for LendingTree, providing a deeper understanding of the company’s financial health and market position.
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