Loop Capital Trims LendingTree Target Price On Mortgage Biz Concerns

Loop Capital’s Blake Harper noted that “persistently low mortgage rates have lowered lender demand, who have seen more organic leads from their own customers.”

Harper maintains a Buy rating on Lendingtree Inc (NASDAQ: TREE), while lowering the price target from $150 to $145.

The analyst mentioned that the company had lowered its marketing spend due to the lower demand trends, which was likely to result in better margins.

Non-Mortgage Doing Better

However, Harper also pointed out that there were “cross-currents” in LendingTree’s non-mortgage business during Q3, with the company indicating that the personal loan business was expected to deliver record revenue for the quarter.

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“LendingTree still has a preliminary injunction on marketing its credit card products through third-party content marketing networks, which has been in place since 6/30/16,” the analyst stated.

Harper estimates that credit cards account for about 10 percent of the company’s revenue, while the content marketing channel contributes an even smaller portion of the revenue, with minimal contribution to earnings.

In addition, LendingTree has been able to diversify its customer acquisition capabilities by partnering directly with publishers and tapping into its MyLendingTree consumers.

“We are adjusting our LendingTree estimates slightly lower given expected weaker trends in the company's mortgage business, while increasing margin estimates given a concurrent pullback in marketing spend,” Harper added.

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